THE HILL POLL: Voters oppose raising the $14.3T debt ceiling
By Erik Wasson - 02/07/11 12:29 AM ET
Only 27 percent of likely voters favor raising the nation’s $14.3 trillion debt ceiling, while 62 percent oppose it, according to an exclusive poll for The Hill.
The poll found solid opposition from Republicans and also from independent voters, who are critical to President Obama’s re-election in 2012.
Seventy-seven percent of likely GOP voters and 64 percent of independent voters said they don’t want the debt ceiling to be raised. Even among Democrats, more oppose raising the ceiling (46 percent) than support it (42 percent).
Winning the congressional vote to raise the debt ceiling is a crucial test for the president. House and Senate Republicans are using the vote, which must take place soon, in an effort to secure deep spending cuts from the White House.
Treasury Secretary Timothy Geithner and White House officials warn of dire consequences if the debt ceiling is not raised.
Federal Reserve Chairman Ben Bernanke also warned lawmakers last week not to use the vote as a bargaining chip, saying it would be “catastrophic” if the nation defaulted. But the poll, conducted by Pulse Opinion Research among 1,000 likely voters, suggests the administration’s message is not resonating beyond the Beltway.
The poll also finds the public continues to believe President Obama’s 2009 economic stimulus package failed to help the economy.
Only 36 percent of voters surveyed said stimulus spending creates jobs, while 48 percent said flatly that it does not. Crucially, 61 percent of independent voters took that negative view.
Only 40 percent of likely voters say the $787 billion stimulus package helped. While 69 percent of Democrats say it boosted growth, 56 percent of independents think the stimulus hurt or had no impact on the economy.
The president’s budget, due Feb. 14, will call for more spending on infrastructure, research and development and education. The polls suggest the public is unreceptive to the idea, so Obama might find it tough to get these budget requests through a Republican House clamoring for deep cuts.
Voters split on Obama’s economic policies. Forty-four percent in the survey said the policies are hurting the economy, while 41 percent said they are helping. The poll’s margin of error is 3 percent.
By a 47-37 percent margin, independents said Obama has hindered the economic recovery.
Party affiliation made a big difference; 68 percent of self-identified Republicans said the president’s policies are hurting the economy, compared to 71 percent of Democrats who said they are helping.
The poll also asked likely voters if Republican control of the House of Representatives would help or hurt the economy, or have no impact. The survey found 44 percent of respondents said it will help, 30 percent said it will hurt and 20 percent said it will have no impact.
The nation’s jobless rate dipped to 9 percent on Friday, which the White House touted as evidence that its economic policies are having a positive effect. But the economy only added 36,000 jobs in January.
“The overall trend of economic data in recent months has been encouraging, as initiatives put in place by this administration are taking hold, but there is still considerable work to do,” White House economic adviser Austan Goolsbee said Friday.
House Republicans, however, make the case that their new majority is responsible for the encouraging news.
“Today’s [jobs] report … does reflect an economic climate that has a measure of greater certainty thanks to the work of Republicans at the end of the last Congress to stop a massive tax hike on families and small businesses,” said House Republican Policy Committee Chairman Tom Price (R-Ga.).
The Hill’s poll was conducted by telephone on Feb. 1.
Wednesday, February 9, 2011
RawStory.com: Pulitzer winner tells Raw Story, "US empire could collapse at any time,"
Market Shorter Headlines
RawStory.com: Pulitzer winner tells Raw Story, "US empire could collapse at any time,"
America's military and economic empire could collapse at any time, but predicting the precise day, week or month of its potential demise is unattainable, according to a former New York Times war correspondent who spoke with Raw Story.
"The when and how is very dangerous to predict because there's always some factor that blindsides you that you didn't expect," Pulitzer-winning journalist Chris Hedges said in an exclusive interview. "It doesn't look good. But exactly how it plays out and when it plays out, having covered disintegrating societies, it's impossible to tell."
He explained that he learned this lesson as events unfolded around him in the fall of 1989. Then, members of the opposition to the Soviet Empire told him that they predicted travel across the Berlin Wall separating East from West Germany would open within the year. "Within a few hours, the wall didn't exist," he said.
Hedges was one of the 131 activists were arrested in an act of civil disobedience outside the White House yesterday, even as Obama was unveiling a new report citing progress in the Afghanistan war.
Speaking to Raw Story on Wednesday night, he said the signs of US collapse are plain to see and compared the country's course through Afghanistan to Soviet Russia's. "We're losing [the war in Afghanistan] in the same way the Red Army lost it," he said. "It's exactly the same configuration where we sort of control the urban centers where 20 percent of the population lives. The rest of the country where 80 percent of the Afghans live is either in the hands of the Taliban or disputed." "Foreigners will not walk the streets of Kabul because of kidnapping, and journalists regularly meet Taliban officials in Kabul because the whole apparatus is so porous and corrupt," he said.
One day after this interview was conducted, reports hit the global media noting the CIA's warning to President Obama, that the Pakistan-supported Taliban could still regain control of the country.
Hedges predicted that President Obama's war report released Thursday would "contradict not only [US] intelligence reports but everything else that is coming out of Afghanistan." His prediction came startlingly true: the CIA's own assessment was said to stand in striking contrast with President Obama's report.
Defense Secretary Robert Gates, however, insisted that the US controlled more territory in Afghanistan than it did a year ago.
'A corporate coup d'état in slow motion'
Hedges said he attended the protest and planned to get arrested because he is against the corporate powers that have enveloped the nation.
"We've undergone a corporate coup d'état in slow motion," he said. "Our public education system has been gutted. Our infrastructure is corroding and collapsing. Unless we begin to physically resist, they are going to solidify neo-feudalism in this country."
"If we think that Obama is bad, watch the next two years because these corporate forces have turned their back on him," Hedges warned.
Hedges, author of "Death of the Liberal Class," said that his vision of America is one with a functioning social democracy, which stands in stark contrast to the nihilism of the corporate state.
"American workers, as they are repeatedly told, will have to become competitive with prison labor in China," he said. "That's where we're headed, and all the pillars of the liberal establishment are complicit in this."
"At least if you get sick in the UK, you don't go bankrupt or die," he added.
Hedges said that another pressure point is the US dollar, which he pointed out had been dropped by Russia and China in favor of modified ruble/renminbi exchanges.
"A few more deals like that, and our currency becomes junk," he said.
RawStory.com: Pulitzer winner tells Raw Story, "US empire could collapse at any time,"
America's military and economic empire could collapse at any time, but predicting the precise day, week or month of its potential demise is unattainable, according to a former New York Times war correspondent who spoke with Raw Story.
"The when and how is very dangerous to predict because there's always some factor that blindsides you that you didn't expect," Pulitzer-winning journalist Chris Hedges said in an exclusive interview. "It doesn't look good. But exactly how it plays out and when it plays out, having covered disintegrating societies, it's impossible to tell."
He explained that he learned this lesson as events unfolded around him in the fall of 1989. Then, members of the opposition to the Soviet Empire told him that they predicted travel across the Berlin Wall separating East from West Germany would open within the year. "Within a few hours, the wall didn't exist," he said.
Hedges was one of the 131 activists were arrested in an act of civil disobedience outside the White House yesterday, even as Obama was unveiling a new report citing progress in the Afghanistan war.
Speaking to Raw Story on Wednesday night, he said the signs of US collapse are plain to see and compared the country's course through Afghanistan to Soviet Russia's. "We're losing [the war in Afghanistan] in the same way the Red Army lost it," he said. "It's exactly the same configuration where we sort of control the urban centers where 20 percent of the population lives. The rest of the country where 80 percent of the Afghans live is either in the hands of the Taliban or disputed." "Foreigners will not walk the streets of Kabul because of kidnapping, and journalists regularly meet Taliban officials in Kabul because the whole apparatus is so porous and corrupt," he said.
One day after this interview was conducted, reports hit the global media noting the CIA's warning to President Obama, that the Pakistan-supported Taliban could still regain control of the country.
Hedges predicted that President Obama's war report released Thursday would "contradict not only [US] intelligence reports but everything else that is coming out of Afghanistan." His prediction came startlingly true: the CIA's own assessment was said to stand in striking contrast with President Obama's report.
Defense Secretary Robert Gates, however, insisted that the US controlled more territory in Afghanistan than it did a year ago.
'A corporate coup d'état in slow motion'
Hedges said he attended the protest and planned to get arrested because he is against the corporate powers that have enveloped the nation.
"We've undergone a corporate coup d'état in slow motion," he said. "Our public education system has been gutted. Our infrastructure is corroding and collapsing. Unless we begin to physically resist, they are going to solidify neo-feudalism in this country."
"If we think that Obama is bad, watch the next two years because these corporate forces have turned their back on him," Hedges warned.
Hedges, author of "Death of the Liberal Class," said that his vision of America is one with a functioning social democracy, which stands in stark contrast to the nihilism of the corporate state.
"American workers, as they are repeatedly told, will have to become competitive with prison labor in China," he said. "That's where we're headed, and all the pillars of the liberal establishment are complicit in this."
"At least if you get sick in the UK, you don't go bankrupt or die," he added.
Hedges said that another pressure point is the US dollar, which he pointed out had been dropped by Russia and China in favor of modified ruble/renminbi exchanges.
"A few more deals like that, and our currency becomes junk," he said.
SEC Charges Hedge Fund Managers and Traders in $30 Million Expert Network Insider Trading Scheme
SEC Charges Hedge Fund Managers and Traders in $30 Million Expert Network Insider Trading Scheme
FOR IMMEDIATE RELEASE
2011-40
Washington, D.C., Feb. 8, 2011 — The Securities and Exchange Commission today charged a New York-based hedge fund and four hedge fund portfolio managers and analysts who illegally traded on confidential information obtained from technology company employees moonlighting as expert network consultants. The scheme netted more than $30 million from trades based on material, nonpublic information about such companies as AMD, Seagate Technology, Western Digital, Fairchild Semiconductor, and Marvell.
Additional Materials
SEC Complaint
News Conference Remarks by Enforcement Director Robert Khuzami
The charges are the first against traders in the SEC’s ongoing investigation of insider trading involving expert networks. The SEC filed its initial charges in the case last week against technology company employees who illegally tipped hedge funds and other investors with material nonpublic information about their companies in return for hundreds of thousands of dollars in sham consulting fees.
In its amended complaint filed today in federal court in Manhattan, the SEC alleges that four hedge fund portfolio managers and analysts received illegal tips from the expert network consultants and then caused their hedge funds to trade on the inside information.
“It is illegal for company insiders who moonlight as consultants to sell confidential information about their companies to traders, and it is equally illegal to buy that corruptly obtained information and trade on it,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Instead of competing on a level playing field with other investors, these hedge fund managers sought to illegally trade today on what others would not learn until tomorrow.”
The SEC’s ongoing investigation is focusing on the activities of expert networks that purportedly provide professional investment research to their clients. While it is legal to obtain expert advice and analysis through expert networking arrangements, it is illegal to trade on material nonpublic information obtained in violation of a duty to keep that information confidential.
The technology company insiders who tipped the confidential information were expert network consultants to the firm Primary Global Research LLC (PGR).
The SEC’s amended complaint alleges:
Samir Barai of New York, N.Y., the founder and portfolio manager of Barai Capital Management, obtained inside information about several technology firms from company insiders, and then traded on the inside information on behalf of Barai Capital.
Jason Pflaum of New York, N.Y., a former technology analyst at Barai Capital Management, obtained inside information about technology companies and shared it with Barai. After Pflaum shared the confidential information with him, Barai used it to illegally trade on behalf of Barai Capital.
Noah Freeman of Boston, Mass., a former managing director at a Boston-based hedge fund, obtained inside information regarding Marvell and shared it with Donald Longueuil of New York, N.Y., a former managing director at a Connecticut-based hedge fund. Longueuil caused his hedge fund to trade on the inside information. Freeman also obtained inside information about another technology company and caused his hedge fund to trade on the nonpublic information.
The SEC’s amended complaint charges each of the defendants with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and additionally charges Barai, Pflaum, Freeman and Longueuil with aiding and abetting others’ violations of Section 10(b) and Rule 10b-5 thereunder. The complaint also charges Barai, Pflaum and Barai Capital with violations of Section 17(a) of the Securities Act of 1933. The complaint seeks a final judgment permanently enjoining the defendants from future violations of the above provisions of the federal securities laws, ordering them to disgorge their ill-gotten gains plus prejudgment interest, and ordering them to pay financial penalties.
Sanjay Wadhwa, Jason Friedman, Joseph Sansone, Daniel Marcus — members of the SEC’s Market Abuse Unit in New York — have conducted the SEC’s investigation with Matthew Watkins, Neil Hendelman, Diego Brucculeri and James D’Avino of the New York Regional Office. The SEC’s litigation effort will be led by Valerie Szczepanik and Kevin McGrath. The SEC thanks the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation for their assistance in the matter.
For more information about this enforcement action, contact:
George Canellos
Director, SEC’s New York Regional Office
(212) 336-1020
David Rosenfeld
Associate Director, SEC’s New York Regional Office
(212) 336-0153
Sanjay Wadhwa
Deputy Chief, Market Abuse Unit, Division of Enforcement
(212) 336-0181
FOR IMMEDIATE RELEASE
2011-40
Washington, D.C., Feb. 8, 2011 — The Securities and Exchange Commission today charged a New York-based hedge fund and four hedge fund portfolio managers and analysts who illegally traded on confidential information obtained from technology company employees moonlighting as expert network consultants. The scheme netted more than $30 million from trades based on material, nonpublic information about such companies as AMD, Seagate Technology, Western Digital, Fairchild Semiconductor, and Marvell.
Additional Materials
SEC Complaint
News Conference Remarks by Enforcement Director Robert Khuzami
The charges are the first against traders in the SEC’s ongoing investigation of insider trading involving expert networks. The SEC filed its initial charges in the case last week against technology company employees who illegally tipped hedge funds and other investors with material nonpublic information about their companies in return for hundreds of thousands of dollars in sham consulting fees.
In its amended complaint filed today in federal court in Manhattan, the SEC alleges that four hedge fund portfolio managers and analysts received illegal tips from the expert network consultants and then caused their hedge funds to trade on the inside information.
“It is illegal for company insiders who moonlight as consultants to sell confidential information about their companies to traders, and it is equally illegal to buy that corruptly obtained information and trade on it,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Instead of competing on a level playing field with other investors, these hedge fund managers sought to illegally trade today on what others would not learn until tomorrow.”
The SEC’s ongoing investigation is focusing on the activities of expert networks that purportedly provide professional investment research to their clients. While it is legal to obtain expert advice and analysis through expert networking arrangements, it is illegal to trade on material nonpublic information obtained in violation of a duty to keep that information confidential.
The technology company insiders who tipped the confidential information were expert network consultants to the firm Primary Global Research LLC (PGR).
The SEC’s amended complaint alleges:
Samir Barai of New York, N.Y., the founder and portfolio manager of Barai Capital Management, obtained inside information about several technology firms from company insiders, and then traded on the inside information on behalf of Barai Capital.
Jason Pflaum of New York, N.Y., a former technology analyst at Barai Capital Management, obtained inside information about technology companies and shared it with Barai. After Pflaum shared the confidential information with him, Barai used it to illegally trade on behalf of Barai Capital.
Noah Freeman of Boston, Mass., a former managing director at a Boston-based hedge fund, obtained inside information regarding Marvell and shared it with Donald Longueuil of New York, N.Y., a former managing director at a Connecticut-based hedge fund. Longueuil caused his hedge fund to trade on the inside information. Freeman also obtained inside information about another technology company and caused his hedge fund to trade on the nonpublic information.
The SEC’s amended complaint charges each of the defendants with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and additionally charges Barai, Pflaum, Freeman and Longueuil with aiding and abetting others’ violations of Section 10(b) and Rule 10b-5 thereunder. The complaint also charges Barai, Pflaum and Barai Capital with violations of Section 17(a) of the Securities Act of 1933. The complaint seeks a final judgment permanently enjoining the defendants from future violations of the above provisions of the federal securities laws, ordering them to disgorge their ill-gotten gains plus prejudgment interest, and ordering them to pay financial penalties.
Sanjay Wadhwa, Jason Friedman, Joseph Sansone, Daniel Marcus — members of the SEC’s Market Abuse Unit in New York — have conducted the SEC’s investigation with Matthew Watkins, Neil Hendelman, Diego Brucculeri and James D’Avino of the New York Regional Office. The SEC’s litigation effort will be led by Valerie Szczepanik and Kevin McGrath. The SEC thanks the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation for their assistance in the matter.
For more information about this enforcement action, contact:
George Canellos
Director, SEC’s New York Regional Office
(212) 336-1020
David Rosenfeld
Associate Director, SEC’s New York Regional Office
(212) 336-0153
Sanjay Wadhwa
Deputy Chief, Market Abuse Unit, Division of Enforcement
(212) 336-0181
Paul Tudor Jones Calling A Top?
Paul Tudor Jones Calling A Top?
Submitted by Tyler Durden on 02/09/2011 11:21 -0500
Ben BernankePaul Tudor Jones
Wondering why the market suddenly appears as if Bernanke said he thought the dollar has hit a technical bottom? The reason is that there is a rumor (for now) that Paul Tudor Jones has just called a top in the S&P, and is also expecting a bounce in bonds. Unclear if PTJ used the Tepper "balls to the walls" trademark when referring to the selling that may commence. And boy are we hoping the selloff with a huge surge in volume that resulted, is not a response to what one man thinks or else there really is no point in trading anything ever again.
Submitted by Tyler Durden on 02/09/2011 11:21 -0500
Ben BernankePaul Tudor Jones
Wondering why the market suddenly appears as if Bernanke said he thought the dollar has hit a technical bottom? The reason is that there is a rumor (for now) that Paul Tudor Jones has just called a top in the S&P, and is also expecting a bounce in bonds. Unclear if PTJ used the Tepper "balls to the walls" trademark when referring to the selling that may commence. And boy are we hoping the selloff with a huge surge in volume that resulted, is not a response to what one man thinks or else there really is no point in trading anything ever again.
Frontrunning: February 9
Submitted by Tyler Durden on 02/09/2011 08:56 -0500
British PoundGermanyInternational Monetary FundratingsReutersTARPTrade BalanceUnited Kingdom
•Two Fed Skeptics of Bond Purchases Say Inflation Underscores Stimulus Risk (Bloomberg)
•'Heavy Lifting’ Looms as China Rate Below Inflation (BusinessWeek)
•Rothschild to take control of the weather next (EarthNews)
•Underground world hints at China's coming crisis (Telegraph)
•Wait A Minute--Why Should I Hate Bernie Madoff? (Forbes)
•Egyptian Unrest Throws Deficit Goals Off Course as Yields Rise (BusinessWeek), all they need is Paulson pitching blank check TARP now
•SEC to Wean Markets Off Credit Ratings (Reuters)
•You don't say: Commodity prices could squeeze economy, just as in 2008 (Barrons)
•And speaking of, did anyone even notice that Moody’s lowered Jordan's debt outlook (BusinessWeek)?
•Asia Fights Inflation With Stronger Currencies (WSJ)
British PoundGermanyInternational Monetary FundratingsReutersTARPTrade BalanceUnited Kingdom
•Two Fed Skeptics of Bond Purchases Say Inflation Underscores Stimulus Risk (Bloomberg)
•'Heavy Lifting’ Looms as China Rate Below Inflation (BusinessWeek)
•Rothschild to take control of the weather next (EarthNews)
•Underground world hints at China's coming crisis (Telegraph)
•Wait A Minute--Why Should I Hate Bernie Madoff? (Forbes)
•Egyptian Unrest Throws Deficit Goals Off Course as Yields Rise (BusinessWeek), all they need is Paulson pitching blank check TARP now
•SEC to Wean Markets Off Credit Ratings (Reuters)
•You don't say: Commodity prices could squeeze economy, just as in 2008 (Barrons)
•And speaking of, did anyone even notice that Moody’s lowered Jordan's debt outlook (BusinessWeek)?
•Asia Fights Inflation With Stronger Currencies (WSJ)
Lets Review and Rewind Back to the start of the Shit Storm
Submitted by: Francis Soyer
020911
Here is a clip when the shit first hit the fan roughly 2 years ago. Listen to the commentary closely and the assesment on what the consequences would and could be. Fast forward to today and look at the dollar index or UUP if you want to see it in etf form. Yes it is disturbing. What is more disturbing is: why is this the only guy up on capital hill who gets it? And if he is NOT the only one who gets it, why is he the only one talking about it or who actually has a pair, and is trying to do something about it?
I can only suppose one of two scenarios. One is that the combined IQ's of the rest of the House and Senate is about the same as an empty beer can or Two that their moral compasses are so fucked up its a wonder they can find their way to chambers to cast votes for their campaign finance buds.
Tuesday, February 8, 2011
The Latest In Insider-Trading Gate: Two Former SAC Traders Charged
The Latest In Insider-Trading Gate: Two Former SAC Traders Charged
Submitted by Tyler Durden on 02/08/2011 12:03 -0500
CitigroupFBIInsider TradingSACSecurities FraudWall Street Journal
The latest development in the insider trading gate, whose sole target is and has always been SAC, appears to be closing in on the target. According to a press release to be held shortly, two former SAC employees are about to become cooperating witnesses for the government. The ex-SACites are Noah Freeman and Donald Longueuil, which according to Bloomberg worked at the fund between 2008 and 2010. The full conference by US Attorney Preet Bharara is due any moment. This is likely just an intermediate phase before the big names start being accused as bigger cases are built against those at the very top.
From Bloomberg:
Noah Freeman and Donald Longueuil, former employees of SAC Capital Advisors LP according to a person familiar with the matter, were charged as part of a nationwide investigation of insider trading at hedge funds, technology companies and so-called expert networking firms.
Longueuil worked at SAC Capital-unit CR Intrinsic from July 2008 to July 2010 and Freeman worked at SAC Capital from June 2008 to January 2010, according to the person, who declined to be identified because the matter isn’t public. Charges against three hedge fund managers and an analyst were announced today by U.S. Attorney Preet Bharara in Manhattan. Counts against two of them are to include obstruction of justice, Bharara said.
Samir Barai was also charged by federal prosecutors in New York, according to court documents. Freeman and Jason Pflaum reached a plea agreement with prosecutors, according to the filings. Winifred Jiau, already charged as part of the probe, communicated with Barai and Freeman, according to court papers.
Barai, founder of Barai Capital Management, is co- conspirator 1, or “CC1,” in the complaint filed in December against Jiau, an ex-consultant for expert-networking firm Primary Global LLC, according to a person familiar with that case.
A profile of all 4 charged hedge funders is below courtesy of the WSJ:
Samir Barai, of Barai Capital Management
Barai in 2008 ordered up purchased of stock in tech companies — including Marvell Technology and Fairchild Semiconductor — after being on the receiving end of their corporate secrets, according to the government charges unsealed today.
Barai in November also told one of his colleagues to destroy “documentary and digital records after reading articles about a federal grand jury investigation into insider trading,” according to the government complaint today.
The Wall Street Journal reported last month that Barai was an unnamed co-conspirator in a December criminal complaint. Prosecutors said a hedge fund, which the Journal has identified as Barai Capital, received more than $820,000 in May and June 2008 from trading ahead of Marvell’s earnings.
Barai until 2007 ran a tech-stock portfolio at Citigroup’s internal hedge-fund division, and then he left to found his own investment firm. FBI agents raided his hedge fund in November, the Journal reported last month. Samir Barai and other employees of Barai Capital either didn’t respond to requests for comment or declined to comment for last month’s stories in the Journal.
Donald Longeuil
Longeuil, 35 years old, left CR Intrinsic Investors LLC, a division of SAC Capital, about a year ago, the Journal is reporting. The government complaint today says Longeuil destroyed a computer flash drive and external hard drives in November, after reading about an investigation into insider trading.
Jason Pfaum
A technology analyst at Barai Capital Management, Pfaum pleaded guilty on charges of conspiracy and securities fraud and has been cooperating with prosecutors in their insider trading investigation, according to the legal filings today. In 2008, according to the government, Pfaum talked with an employee at Fairchild Semiconductor to glean secrets about the company. Barai then a day later ordered the purchase of about 95,000 Fairchild shares, according to the legal complaint.
Noah Freeman
Freeman worked at hedge fund SAC Capital’s Boston office from 2008 until January 2010, the Journal is reporting. Freeman, whom the government describes as a specialist in the tech and semiconductor industries, “maintained a network of sources who provided Freeman with Inside Information regarding public companies,” including Marvell, Nvidia, Fairchild and Actel, according to the legal filings released today.
Submitted by Tyler Durden on 02/08/2011 12:03 -0500
CitigroupFBIInsider TradingSACSecurities FraudWall Street Journal
The latest development in the insider trading gate, whose sole target is and has always been SAC, appears to be closing in on the target. According to a press release to be held shortly, two former SAC employees are about to become cooperating witnesses for the government. The ex-SACites are Noah Freeman and Donald Longueuil, which according to Bloomberg worked at the fund between 2008 and 2010. The full conference by US Attorney Preet Bharara is due any moment. This is likely just an intermediate phase before the big names start being accused as bigger cases are built against those at the very top.
From Bloomberg:
Noah Freeman and Donald Longueuil, former employees of SAC Capital Advisors LP according to a person familiar with the matter, were charged as part of a nationwide investigation of insider trading at hedge funds, technology companies and so-called expert networking firms.
Longueuil worked at SAC Capital-unit CR Intrinsic from July 2008 to July 2010 and Freeman worked at SAC Capital from June 2008 to January 2010, according to the person, who declined to be identified because the matter isn’t public. Charges against three hedge fund managers and an analyst were announced today by U.S. Attorney Preet Bharara in Manhattan. Counts against two of them are to include obstruction of justice, Bharara said.
Samir Barai was also charged by federal prosecutors in New York, according to court documents. Freeman and Jason Pflaum reached a plea agreement with prosecutors, according to the filings. Winifred Jiau, already charged as part of the probe, communicated with Barai and Freeman, according to court papers.
Barai, founder of Barai Capital Management, is co- conspirator 1, or “CC1,” in the complaint filed in December against Jiau, an ex-consultant for expert-networking firm Primary Global LLC, according to a person familiar with that case.
A profile of all 4 charged hedge funders is below courtesy of the WSJ:
Samir Barai, of Barai Capital Management
Barai in 2008 ordered up purchased of stock in tech companies — including Marvell Technology and Fairchild Semiconductor — after being on the receiving end of their corporate secrets, according to the government charges unsealed today.
Barai in November also told one of his colleagues to destroy “documentary and digital records after reading articles about a federal grand jury investigation into insider trading,” according to the government complaint today.
The Wall Street Journal reported last month that Barai was an unnamed co-conspirator in a December criminal complaint. Prosecutors said a hedge fund, which the Journal has identified as Barai Capital, received more than $820,000 in May and June 2008 from trading ahead of Marvell’s earnings.
Barai until 2007 ran a tech-stock portfolio at Citigroup’s internal hedge-fund division, and then he left to found his own investment firm. FBI agents raided his hedge fund in November, the Journal reported last month. Samir Barai and other employees of Barai Capital either didn’t respond to requests for comment or declined to comment for last month’s stories in the Journal.
Donald Longeuil
Longeuil, 35 years old, left CR Intrinsic Investors LLC, a division of SAC Capital, about a year ago, the Journal is reporting. The government complaint today says Longeuil destroyed a computer flash drive and external hard drives in November, after reading about an investigation into insider trading.
Jason Pfaum
A technology analyst at Barai Capital Management, Pfaum pleaded guilty on charges of conspiracy and securities fraud and has been cooperating with prosecutors in their insider trading investigation, according to the legal filings today. In 2008, according to the government, Pfaum talked with an employee at Fairchild Semiconductor to glean secrets about the company. Barai then a day later ordered the purchase of about 95,000 Fairchild shares, according to the legal complaint.
Noah Freeman
Freeman worked at hedge fund SAC Capital’s Boston office from 2008 until January 2010, the Journal is reporting. Freeman, whom the government describes as a specialist in the tech and semiconductor industries, “maintained a network of sources who provided Freeman with Inside Information regarding public companies,” including Marvell, Nvidia, Fairchild and Actel, according to the legal filings released today.
Ratigan And Fleckenstein Explain The Fed's Role In Recent Food Price Ignited Revolutions
For over a year now, Zero Hedge has been predicting that in its foolhardy attempt of "inflation or bust", the Fed's actions would sooner or later lead to mass rioting and possible revolutions as a result of surging and out of control food prices (which are just the peak of the alternative investment pyramid - yes, stunningly free money can go into other things besides stocks). There have been those who have claimed that deflation is still a far greater force, despite that the all important shadow banking system made a positive inflection point in ending deleveraging in Q3 (and on March 10 we will know whether the Q3 strength persisted into Q4) as was discussed previously, and today's first time in over two years increase in revolving credit merely confirms this view. Alas, to all who believe that deflation or deleveraging is a greater threat: you have our sympathies, as fundamentally your are correct, and were the business cycle have the benefit of playing out in normal course, all the world's banks would become insolvent and yes, deflation would be rampaging. The problem is that these same people do not realize that to Bernanke (whom we have referred Genocide Ben for precisely this reason) there is no other alternative, and inflation must be achieved no matter how terrible the social cost, or the damage to the monetary system. Regardless, the actions in North Africa are just the start. Commodities will run up far higher, and discontent will sooner or later reach to Asia, and possibly to countries which have nuclear arsenals at their disposal. What happens then is anyone guess. Yet for anyone who is still confused about the ultimate Fed agenda, Dylan Ratigan and Bill Fleckenstein sat down late last week to make it so clear that virtually anyone and everyone can understand what the Bernanke endgame is.
Monday, February 7, 2011
Just How Ugly Is The Truth Of America's Unemployment: David Rosenberg Explains
Just How Ugly Is The Truth Of America's Unemployment: David Rosenberg Explains
Submitted by Tyler Durden on 02/07/2011 11:02 -0500
AIGAmerican International GroupBear StearnsBen BernankeChain Store SalesDavid RosenbergGross Domestic ProductLehmanObama AdministrationPersonal IncomeRealityRecessionrecoveryRosenbergUnemploymentYield Curve
Over the past 3 days America has been battered by one after another apologist explaining just how good the employment data is if one strips out all the "bad", and how all the "bad" can and should be stripped out by all patriots, and attributed solely to bad weather. For those who are beyond sick and tired of listening to this tripe, here is David Rosenberg once again telling it how it is. In summary: "The data from the Household survey are truly insane. The labour force has plunged an epic 764k in the past two months. The level of unemployment has collapsed 1.2 million, which has never happened before. People not counted in the labour force soared 753k in the past two months. These numbers are simply off the charts and likely reflect the throngs of unemployed people starting to lose their extended benefits and no longer continuing their job search (for the two-thirds of them not finding a new job). These folks either go on welfare or they rely on their spouse or other family members or friends for support."
JOBS DATA REDUX — ADDING MORE MEAT TO THE BONE
It is laughable that everyone believes the labour market in the U.S.A. is improving. Lost in the debate over the weather impact was the benchmark revision to 2010 — overstated by 215k or 24%. The U.S. economy generated 909k jobs last year, which works out to just under 76k per month. That is insignificant considering that the population grew around 160k per month. The level of U.S. employment today stands at 130.265 million, which is where it was in January 2003.
The data from the Household survey are truly insane. The labour force has plunged an epic 764k in the past two months. The level of unemployment has collapsed 1.2 million, which has never happened before. People not counted in the labour force soared 753k in the past two months.
These numbers are simply off the charts and likely reflect the throngs of unemployed people starting to lose their extended benefits and no longer continuing their job search (for the two-thirds of them not finding a new job). These folks either go on welfare or they rely on their spouse or other family members or friends for support.
Meanwhile, it does look like real weekly earnings contracted in January for the third month in a row — that last occurred from April-June of 2009. Once the payroll tax cut effect fades and material cost pressures come to bear with a lag in margins the retail space will be squeezed hard.
Saving the day now are the payroll tax cuts but this effect wears off in Q2. Congress is about to cut spending and Bernanke doesn’t have a ton of support for QE2 from within the ranks. And the story ahead is one of profit margin squeeze more generally, though the market doesn’t yet see it.
WHAT DID THE U-6 UNEMPLOYMENT RATE DO?
We were asked about this on Friday because it was already known that it went from 16.7% to 16.1% — everyone wants to believe that this is a harbinger of labour market tightening. But it may be time for a reality check. The broad U-6 jobless rate measure was 8.8% when the recession began, was 9.0% when Bear Stearns failed, 10.5% when Fannie and Freddie imploded, 11.9% when AIG was taken over, Lehman failed and Merrill taken over, and 15.6% when the stock market hit its cycle low.
There’s also some seasonal adjustment quirks because of the massive increases in the raw unemployment data in January 2010 and January 2009 and the current seasonal factors are most sensitive to smoothing out what happened in the same month of the past two years. In January 2009, the U6 spiked 1.9% on a nonseasonally adjusted basis and in January 2010 it rose 0.9%. So the seasonal factors now were looking for an increase of 1.4% and instead it comes in at +0.7%, which on a raw basis is pretty normal for January, and it gets translated into a decline to 16.1% from 16.7%. Remember, the raw data showed an increase to 17.3% from 16.6%.
Nobody seemed to know what to do with the job data on Friday due to weather. It’s interesting that the storms seemed to have little effect on the ISMs or chain store sales, but everyone believes that just because a bunch of folks didn’t make it into the office in January the impact is probably hugely exaggerated. We saw an economist quoted on the front page of Investor’s Business Daily stating so arrogantly that he is “comfortable” with the view that the snow subtracted 100k from nonfarm payrolls in January. Even if true that would still be 138k, which is still abnormally weak for this stage of the cycle, not to mention still quite a bit below the post-ADP whispered estimates of +180k.
This U.S. labour market is still one sick puppy. The fact that 2.8 million Americans said they had given up on their job search in January was overshadowed by the debates surrounding the weather impact on the headline. Talk about being small-minded and totally myopic on the small picture. Then again, we have to admit that is what drives speculative rallies — the “noise” in the data. Of all the analysis we saw over the weekend, the only one that made any sense was the editorial by Bob Herbert on page A15 of the weekend NYT:
“The policy makers who rely on the data zealots are just as detached from the real world of real people. They’re always promising in the most earnest tones imaginable to do something about employment, to ease an awful squeeze on the middle class (policy makers never talk about the poor), to reform education, and so on.
They say those things because they have to. But they are far more obsessed with the numbers than they are with the struggles and suffering of the real people. You won’t hear policy makers acknowledging that the unemployment numbers would be much worse if not for the millions of people who have left the work force over the past few years. What happened to those folks? How are they and their families faring.
The policy makers don’t tell us that most of the new jobs being created in such meager numbers are, in fact, poor ones, with lousy pay and few or no benefits. What we hear is what the data zealots pump out week after week, that the market is up, retail sales are strong, Wall Street salaries and bonuses are streaking, as always, to the moon, and that businesses are sitting on mountains of cash. So all must be right with the world.
Jobs? Well, the less said the better
What’s really happening, of course, is the same thing that’s been happening in this country for the longest time — the folks at the top are doing fabulously well and they are not interested in the least in spreading the wealth around.
The people running the country — the ones with the real clout, whether Democrats or Republicans — are all part of this power elite. Ordinary people may be struggling, but both the Obama administration and the Republican Party leadership are down on their knees, slavishly kissing the rings of the financial and corporate kingpins.”
Look, these are just excerpts for your convenience. The whole column just oozes with the truth — the true state of the labour market that is widely dismissed.
As a trusted and loyal reader notified us on Friday after the data were released and the consensus view out of the bond market was how reflationary this labour market report was, the civilian population rose 1.872 million last year. At the same time, the labour force fell 167k. Those not in the labour force soared 2.094 million. Just in January, we saw 319,000 people drop out of the work force. These numbers are incredible. This is a highly dysfunctional labour market. People are falling through the cracks at an alarming rate as they come off their extended jobless benefits — “doubling up” as Bob Hebert put it — and we have traders and economists debating the weather effects of a nonfarm payroll data-point that will most assuredly get revised no fewer than three times in the next couple of years.
It’s incredible how the masses of pundits have responded to the data.
Real labour compensation contracted at a 0.6% annual rate in Q4, and since the recession technically ended, it has shrunk in four of the last six quarters. How is this the hallmark of a well functioning labour market? We can see now how this environment has been wonderful for equities:
•The Chinese government stimulates to the effect of 13% of GDP in late 2008 and this spills over globally.
•The T.A.R.P. money is distributed around the financial and industrial sector in the U.S.A.
•Bank shares are bought by the Treasury; ditto for shares of auto companies.
•Accounting rules are changed so the banks can start showing a profit.
•The Fed radically steepens the yield curve by cutting rates to zero and then promotes financial sector profitability by purchasing mortgages en masse. The mantra is that the Fed and Treasury saved us from a Depression.
•The Fed moves to expand its balance sheet even more in November but unofficially announces the extension in late August.
•The U.S. government embarks on a spending spree in early 2009 and runs up a record debt bill and then extends the stimulus in late 2010.
So the corporate sector has been receiving tremendous support from the government. All the while, the acute anxiety among the working class has allowed companies to continuously cut unit labour costs, which in turn has prompted a V-shaped recovery in profit margins.
Now what about the top-line? We just saw in those Q4 productivity numbers that came out for Q4 that the price deflator for the nonfarm business sector actually fell at a 0.9% annual rate. But, you see, companies don’t have to worry about that — they can afford to keep prices down because not only can they cut labour costs quite easily in this environment, but the federal government is ensuring that people still get paid even if it’s not from their employer. We have a situation now where a record near-20% of total personal income is coming in the form of government assistance, whether that be in Social Security, food stamps, or the unprecedented expansion of jobless benefits.
But to be calling for a labour market recovery when real compensation per hour is declining at a 0.6% annual rate is just slightly a case of looking at the situation through rose-coloured glasses. Just a tad.
Submitted by Tyler Durden on 02/07/2011 11:02 -0500
AIGAmerican International GroupBear StearnsBen BernankeChain Store SalesDavid RosenbergGross Domestic ProductLehmanObama AdministrationPersonal IncomeRealityRecessionrecoveryRosenbergUnemploymentYield Curve
Over the past 3 days America has been battered by one after another apologist explaining just how good the employment data is if one strips out all the "bad", and how all the "bad" can and should be stripped out by all patriots, and attributed solely to bad weather. For those who are beyond sick and tired of listening to this tripe, here is David Rosenberg once again telling it how it is. In summary: "The data from the Household survey are truly insane. The labour force has plunged an epic 764k in the past two months. The level of unemployment has collapsed 1.2 million, which has never happened before. People not counted in the labour force soared 753k in the past two months. These numbers are simply off the charts and likely reflect the throngs of unemployed people starting to lose their extended benefits and no longer continuing their job search (for the two-thirds of them not finding a new job). These folks either go on welfare or they rely on their spouse or other family members or friends for support."
JOBS DATA REDUX — ADDING MORE MEAT TO THE BONE
It is laughable that everyone believes the labour market in the U.S.A. is improving. Lost in the debate over the weather impact was the benchmark revision to 2010 — overstated by 215k or 24%. The U.S. economy generated 909k jobs last year, which works out to just under 76k per month. That is insignificant considering that the population grew around 160k per month. The level of U.S. employment today stands at 130.265 million, which is where it was in January 2003.
The data from the Household survey are truly insane. The labour force has plunged an epic 764k in the past two months. The level of unemployment has collapsed 1.2 million, which has never happened before. People not counted in the labour force soared 753k in the past two months.
These numbers are simply off the charts and likely reflect the throngs of unemployed people starting to lose their extended benefits and no longer continuing their job search (for the two-thirds of them not finding a new job). These folks either go on welfare or they rely on their spouse or other family members or friends for support.
Meanwhile, it does look like real weekly earnings contracted in January for the third month in a row — that last occurred from April-June of 2009. Once the payroll tax cut effect fades and material cost pressures come to bear with a lag in margins the retail space will be squeezed hard.
Saving the day now are the payroll tax cuts but this effect wears off in Q2. Congress is about to cut spending and Bernanke doesn’t have a ton of support for QE2 from within the ranks. And the story ahead is one of profit margin squeeze more generally, though the market doesn’t yet see it.
WHAT DID THE U-6 UNEMPLOYMENT RATE DO?
We were asked about this on Friday because it was already known that it went from 16.7% to 16.1% — everyone wants to believe that this is a harbinger of labour market tightening. But it may be time for a reality check. The broad U-6 jobless rate measure was 8.8% when the recession began, was 9.0% when Bear Stearns failed, 10.5% when Fannie and Freddie imploded, 11.9% when AIG was taken over, Lehman failed and Merrill taken over, and 15.6% when the stock market hit its cycle low.
There’s also some seasonal adjustment quirks because of the massive increases in the raw unemployment data in January 2010 and January 2009 and the current seasonal factors are most sensitive to smoothing out what happened in the same month of the past two years. In January 2009, the U6 spiked 1.9% on a nonseasonally adjusted basis and in January 2010 it rose 0.9%. So the seasonal factors now were looking for an increase of 1.4% and instead it comes in at +0.7%, which on a raw basis is pretty normal for January, and it gets translated into a decline to 16.1% from 16.7%. Remember, the raw data showed an increase to 17.3% from 16.6%.
Nobody seemed to know what to do with the job data on Friday due to weather. It’s interesting that the storms seemed to have little effect on the ISMs or chain store sales, but everyone believes that just because a bunch of folks didn’t make it into the office in January the impact is probably hugely exaggerated. We saw an economist quoted on the front page of Investor’s Business Daily stating so arrogantly that he is “comfortable” with the view that the snow subtracted 100k from nonfarm payrolls in January. Even if true that would still be 138k, which is still abnormally weak for this stage of the cycle, not to mention still quite a bit below the post-ADP whispered estimates of +180k.
This U.S. labour market is still one sick puppy. The fact that 2.8 million Americans said they had given up on their job search in January was overshadowed by the debates surrounding the weather impact on the headline. Talk about being small-minded and totally myopic on the small picture. Then again, we have to admit that is what drives speculative rallies — the “noise” in the data. Of all the analysis we saw over the weekend, the only one that made any sense was the editorial by Bob Herbert on page A15 of the weekend NYT:
“The policy makers who rely on the data zealots are just as detached from the real world of real people. They’re always promising in the most earnest tones imaginable to do something about employment, to ease an awful squeeze on the middle class (policy makers never talk about the poor), to reform education, and so on.
They say those things because they have to. But they are far more obsessed with the numbers than they are with the struggles and suffering of the real people. You won’t hear policy makers acknowledging that the unemployment numbers would be much worse if not for the millions of people who have left the work force over the past few years. What happened to those folks? How are they and their families faring.
The policy makers don’t tell us that most of the new jobs being created in such meager numbers are, in fact, poor ones, with lousy pay and few or no benefits. What we hear is what the data zealots pump out week after week, that the market is up, retail sales are strong, Wall Street salaries and bonuses are streaking, as always, to the moon, and that businesses are sitting on mountains of cash. So all must be right with the world.
Jobs? Well, the less said the better
What’s really happening, of course, is the same thing that’s been happening in this country for the longest time — the folks at the top are doing fabulously well and they are not interested in the least in spreading the wealth around.
The people running the country — the ones with the real clout, whether Democrats or Republicans — are all part of this power elite. Ordinary people may be struggling, but both the Obama administration and the Republican Party leadership are down on their knees, slavishly kissing the rings of the financial and corporate kingpins.”
Look, these are just excerpts for your convenience. The whole column just oozes with the truth — the true state of the labour market that is widely dismissed.
As a trusted and loyal reader notified us on Friday after the data were released and the consensus view out of the bond market was how reflationary this labour market report was, the civilian population rose 1.872 million last year. At the same time, the labour force fell 167k. Those not in the labour force soared 2.094 million. Just in January, we saw 319,000 people drop out of the work force. These numbers are incredible. This is a highly dysfunctional labour market. People are falling through the cracks at an alarming rate as they come off their extended jobless benefits — “doubling up” as Bob Hebert put it — and we have traders and economists debating the weather effects of a nonfarm payroll data-point that will most assuredly get revised no fewer than three times in the next couple of years.
It’s incredible how the masses of pundits have responded to the data.
Real labour compensation contracted at a 0.6% annual rate in Q4, and since the recession technically ended, it has shrunk in four of the last six quarters. How is this the hallmark of a well functioning labour market? We can see now how this environment has been wonderful for equities:
•The Chinese government stimulates to the effect of 13% of GDP in late 2008 and this spills over globally.
•The T.A.R.P. money is distributed around the financial and industrial sector in the U.S.A.
•Bank shares are bought by the Treasury; ditto for shares of auto companies.
•Accounting rules are changed so the banks can start showing a profit.
•The Fed radically steepens the yield curve by cutting rates to zero and then promotes financial sector profitability by purchasing mortgages en masse. The mantra is that the Fed and Treasury saved us from a Depression.
•The Fed moves to expand its balance sheet even more in November but unofficially announces the extension in late August.
•The U.S. government embarks on a spending spree in early 2009 and runs up a record debt bill and then extends the stimulus in late 2010.
So the corporate sector has been receiving tremendous support from the government. All the while, the acute anxiety among the working class has allowed companies to continuously cut unit labour costs, which in turn has prompted a V-shaped recovery in profit margins.
Now what about the top-line? We just saw in those Q4 productivity numbers that came out for Q4 that the price deflator for the nonfarm business sector actually fell at a 0.9% annual rate. But, you see, companies don’t have to worry about that — they can afford to keep prices down because not only can they cut labour costs quite easily in this environment, but the federal government is ensuring that people still get paid even if it’s not from their employer. We have a situation now where a record near-20% of total personal income is coming in the form of government assistance, whether that be in Social Security, food stamps, or the unprecedented expansion of jobless benefits.
But to be calling for a labour market recovery when real compensation per hour is declining at a 0.6% annual rate is just slightly a case of looking at the situation through rose-coloured glasses. Just a tad.
Friday, February 4, 2011
Frontrunning Today's NFP Number (And Benchmark Revisions)
Frontrunning Today's NFP Number (And Benchmark Revisions)
Submitted by Tyler Durden on 02/04/2011 07:16 -0500
Goldman's Andrew Tilton dissects today's NFP number, explaining why if it is weaker than expected (+146k) it is due to snow, and why if it stronger than expected, it is entirely due to the "economic recovery" (and not Bernanke's hyperinflationary mandate). Bottom line: win-win, while North African (and soon Middle East) regimes: lose-lose.
Winter Weather Vs. Improving Fundamentals--A January Job Market Showdown
The January employment report is setting up to be a duel between improving job market fundamentals and nasty winter weather. The fundamentals have been strong, with accelerating GDP growth, signs of a pickup in job openings, and a declining trend of layoffs in recent months. But very cold and snowy winter weather—including a “major” snowstorm in the January payroll survey week—likely kept some people from getting to work, suppressing the payroll count.
•We continue to estimate a gain of 175,000 in nonfarm payrolls for January. The underlying trend is very likely stronger than this—or will be soon—but bad weather will mask some of that improvement. We expect the unemployment rate to tick back up to 9.5% after December’s very sharp decline. Overall, market risks are probably skewed to the side of a “strong employment” reaction—weaker numbers may be downplayed as the result of weather, whereas a strong report is likely to be viewed as evidence of an improving trend.
•Tomorrow’s report will also feature the annual “benchmark revisions” to the employment data; the Labor Department’s preliminary estimate is for a 366,000 downward revision to the level of payrolls in March 2010, implying that job growth over the previous year was overestimated by about 30,000 per month. Typically, revisions for subsequent months are directionally similar but smaller in magnitude.
The January employment report is setting up to be a duel between improving job market fundamentals and nasty winter weather. In general, labor market fundamentals have looked quite strong in recent months. But very cold and snowy winter weather—including a “major” snowstorm in the January payroll survey week—likely kept some people from getting to work, suppressing the payroll count. Below we take a look at each of these forces in turn.
On the fundamental side, good labor market omens continue to accumulate:
1. Accelerating economic growth. Real GDP growth picked up to 3.2% in the fourth quarter, the second consecutive acceleration. The composition of the report was very encouraging as well; one way to see this is that nonfarm output rose 4.5% annualized in Q4 (helping productivity growth to a solid performance in a report earlier today). Generally, employment growth follows GDP growth with a short lag of one to a few months, so accelerating GDP growth should translate into somewhat faster employment growth in fairly short order.
2. A steady trend down in layoffs. The four-week average of new jobless claims reached 413,000 in the January payroll survey week, down from an average of 465,000 through the first three quarters of 2010. Adjusted for the size of the labor force, new claims have fallen to mid-1990s levels, the onset of a period of very strong employment growth.
3. An increase (possibly large) in job openings. The Conference Board’s monthly report on job advertising showed an enormous surge in open positions. The 16% month-on-month gain in new online job advertisements was the largest in the six-year history of the series. However, this must be taken with a grain of salt given that the report included significant revisions to historical data (apparently due to a new process to remove duplicates and inauthentic ads), and given that the underlying non-seasonally adjusted data is not available (despite our requests) for analysis. The Monster employment index was directionally consistent but much less spectacular, posting a 3-point gain after seasonal adjustment (slightly over a 2% increase).
4. A robust ADP report. Though we were rightly suspicious of the large gain in December’s ADP report (see “Growth is Accelerating—When Will Employment?,” US Daily, January 5), its January reading should not suffer from the “purging” issue that concerned us last month. (Through most of 2010, ADP missed to the low side; adjusting for its average error last year, the gain of 187,000 private sector jobs forecasted by the ADP report would imply 246,000 private payrolls.) This month the issue is different: ADP’s employment count is based on the number of people on payrolls, regardless of how many hours they worked, so it does not exhibit a significant snowstorm effect. The Labor Department report only counts people as employed “who received pay for any part of the pay period that includes the 12th day of the month” (for more details, see http://www.bls.gov/ces/cesfaq.htm#scope2), so hourly employees who didn’t work at all during this time due to weather would not count as employed in the official data whereas they do in the ADP report.
5. Better survey data. Both of the monthly surveys conducted by the Institute for Supply Management (ISM) in January featured gains in indexes of employment. In fact, the employment component of the ISM manufacturing survey rose to its highest reading since 1973 (61.7, from 58.9 in December). The nonmanufacturing survey’s employment index rose to 54.5, the highest reading for this survey since May 2006. Less importantly, the Conference Board’s survey of consumers saw an improvement in perceptions of job availability, with the difference between the share of consumers viewing jobs as “plentiful” versus “hard to get” falling to -38.2%--a dismal level, but the best reading in 20 months.
If the fundamentals were the only thing we had to worry about, this month’s payroll call would be fairly simple—better than the last report, probably much better. But as so often happens, there’s a complicating factor. While the fundamentals look encouraging, January’s weather was terrible:
1. Cold weather. Winter temperatures can have a significant impact on employment in seasonally sensitive sectors (for a primer on the effects of weather on the economic data more broadly, see “What’s With the Weather?” US Economics Analyst 07/02, January 12, 2007). January was much colder than the seasonal norm—for the month as a whole, essentially tied for the coldest January since 1994. However, the payroll report measures month-on-month changes, and December was substantially colder than normal as well (the coldest in a decade, in fact). Adjusting for the timing of the employment survey and other factors, we estimate the incremental impact in January at perhaps 10,000-20,000 jobs. This should show up in weaker-than-usual growth of sectors like construction.
2. “Major” snowstorm. The Midwest and Northeast were hit by a large snowstorm late in the payroll survey week. This caused at least a few firms to reduce work hours and likewise kept at least some employees from reaching their workplaces. When we published our original payroll forecast, the National Oceanic and Atmospheric Administration (NOAA) had not yet issued a rating for the storm; it now has a preliminary categorization of “major” (the middle of five rankings), bigger than we expected. If we include a variable for snowstorm intensity in our models of employment, we find that a storm of this magnitude has an average impact in the neighborhood of 40,000-50,000 on reported payroll employment. We emphasize that this is quite uncertain, as we don’t have many data points (large snowstorms during the payroll survey week) to go on. Any weather effect should be fully unwound the subsequent month (i.e. if January were 50,000 below the underlying trend, February should be 50,000 above it), assuming of course that we don’t see another large snowstorm next week. Most of the snowstorm effect occurs in the construction and leisure/hospitality (hotels and restaurants) sectors, so job gains or losses in these two sectors, which have averaged -5,000 and +19,000 respectively over the past three months, will help us gauge the extent of any weather effect on the report.
When all is said and done, we haven’t changed our preliminary forecast for the employment report. We expect an increase in nonfarm payrolls of 175,000, with the unemployment rate at 9.5% (giving back a small part of its large drop in December), and average hourly earnings up 0.1%.
Why haven’t we changed our forecast this week? We’ve gotten better-than-expected news on the fundamentals (particularly online job advertising, the ADP report, and the ISM employment indexes), but worse-than-expected news on weather (the NOAA’s quantitative ranking of the snowstorm suggests a considerably bigger impact than we’d thought at first), and we think these are at least partly offsetting. So there is a lot of uncertainty, but it runs in both directions. In any case, in terms of market impact, we view the risks as skewed to the side of a “strong employment” reaction—weaker numbers are likely to be downplayed as the result of weather distortions, whereas strong numbers are likely to be viewed as evidence of an improving trend. Note that barring a sharp shift in the fundamental data or another big snowstorm, the February employment report is likely to look very strong, as it should benefit from mean reversion on the weather front.
One final consideration in Friday’s report: the Labor Department will indicate the extent of its annual “benchmark revision” to nonfarm payrolls. Each year, the Labor Department adjusts the level of payrolls the previous March to reflect a near-comprehensive count of unemployment insurance records up to that point. Last October, the Labor Department estimated that it would have to revise down the level of March 2010 payrolls by 366,000. A downward benchmark revision would in turn result in a downward revision to monthly changes since the previous benchmark in March 2009 (if the adjustment turned out to be 366,000, then the average monthly change between March 2009 and March 2010 would be revised down by about 30,000). The Labor Department will also adjust monthly changes since March 2010 to reflect its assessment of what the comprehensive data imply for more recent employment growth; typically these revisions are directionally similar but smaller in magnitude.
Submitted by Tyler Durden on 02/04/2011 07:16 -0500
Goldman's Andrew Tilton dissects today's NFP number, explaining why if it is weaker than expected (+146k) it is due to snow, and why if it stronger than expected, it is entirely due to the "economic recovery" (and not Bernanke's hyperinflationary mandate). Bottom line: win-win, while North African (and soon Middle East) regimes: lose-lose.
Winter Weather Vs. Improving Fundamentals--A January Job Market Showdown
The January employment report is setting up to be a duel between improving job market fundamentals and nasty winter weather. The fundamentals have been strong, with accelerating GDP growth, signs of a pickup in job openings, and a declining trend of layoffs in recent months. But very cold and snowy winter weather—including a “major” snowstorm in the January payroll survey week—likely kept some people from getting to work, suppressing the payroll count.
•We continue to estimate a gain of 175,000 in nonfarm payrolls for January. The underlying trend is very likely stronger than this—or will be soon—but bad weather will mask some of that improvement. We expect the unemployment rate to tick back up to 9.5% after December’s very sharp decline. Overall, market risks are probably skewed to the side of a “strong employment” reaction—weaker numbers may be downplayed as the result of weather, whereas a strong report is likely to be viewed as evidence of an improving trend.
•Tomorrow’s report will also feature the annual “benchmark revisions” to the employment data; the Labor Department’s preliminary estimate is for a 366,000 downward revision to the level of payrolls in March 2010, implying that job growth over the previous year was overestimated by about 30,000 per month. Typically, revisions for subsequent months are directionally similar but smaller in magnitude.
The January employment report is setting up to be a duel between improving job market fundamentals and nasty winter weather. In general, labor market fundamentals have looked quite strong in recent months. But very cold and snowy winter weather—including a “major” snowstorm in the January payroll survey week—likely kept some people from getting to work, suppressing the payroll count. Below we take a look at each of these forces in turn.
On the fundamental side, good labor market omens continue to accumulate:
1. Accelerating economic growth. Real GDP growth picked up to 3.2% in the fourth quarter, the second consecutive acceleration. The composition of the report was very encouraging as well; one way to see this is that nonfarm output rose 4.5% annualized in Q4 (helping productivity growth to a solid performance in a report earlier today). Generally, employment growth follows GDP growth with a short lag of one to a few months, so accelerating GDP growth should translate into somewhat faster employment growth in fairly short order.
2. A steady trend down in layoffs. The four-week average of new jobless claims reached 413,000 in the January payroll survey week, down from an average of 465,000 through the first three quarters of 2010. Adjusted for the size of the labor force, new claims have fallen to mid-1990s levels, the onset of a period of very strong employment growth.
3. An increase (possibly large) in job openings. The Conference Board’s monthly report on job advertising showed an enormous surge in open positions. The 16% month-on-month gain in new online job advertisements was the largest in the six-year history of the series. However, this must be taken with a grain of salt given that the report included significant revisions to historical data (apparently due to a new process to remove duplicates and inauthentic ads), and given that the underlying non-seasonally adjusted data is not available (despite our requests) for analysis. The Monster employment index was directionally consistent but much less spectacular, posting a 3-point gain after seasonal adjustment (slightly over a 2% increase).
4. A robust ADP report. Though we were rightly suspicious of the large gain in December’s ADP report (see “Growth is Accelerating—When Will Employment?,” US Daily, January 5), its January reading should not suffer from the “purging” issue that concerned us last month. (Through most of 2010, ADP missed to the low side; adjusting for its average error last year, the gain of 187,000 private sector jobs forecasted by the ADP report would imply 246,000 private payrolls.) This month the issue is different: ADP’s employment count is based on the number of people on payrolls, regardless of how many hours they worked, so it does not exhibit a significant snowstorm effect. The Labor Department report only counts people as employed “who received pay for any part of the pay period that includes the 12th day of the month” (for more details, see http://www.bls.gov/ces/cesfaq.htm#scope2), so hourly employees who didn’t work at all during this time due to weather would not count as employed in the official data whereas they do in the ADP report.
5. Better survey data. Both of the monthly surveys conducted by the Institute for Supply Management (ISM) in January featured gains in indexes of employment. In fact, the employment component of the ISM manufacturing survey rose to its highest reading since 1973 (61.7, from 58.9 in December). The nonmanufacturing survey’s employment index rose to 54.5, the highest reading for this survey since May 2006. Less importantly, the Conference Board’s survey of consumers saw an improvement in perceptions of job availability, with the difference between the share of consumers viewing jobs as “plentiful” versus “hard to get” falling to -38.2%--a dismal level, but the best reading in 20 months.
If the fundamentals were the only thing we had to worry about, this month’s payroll call would be fairly simple—better than the last report, probably much better. But as so often happens, there’s a complicating factor. While the fundamentals look encouraging, January’s weather was terrible:
1. Cold weather. Winter temperatures can have a significant impact on employment in seasonally sensitive sectors (for a primer on the effects of weather on the economic data more broadly, see “What’s With the Weather?” US Economics Analyst 07/02, January 12, 2007). January was much colder than the seasonal norm—for the month as a whole, essentially tied for the coldest January since 1994. However, the payroll report measures month-on-month changes, and December was substantially colder than normal as well (the coldest in a decade, in fact). Adjusting for the timing of the employment survey and other factors, we estimate the incremental impact in January at perhaps 10,000-20,000 jobs. This should show up in weaker-than-usual growth of sectors like construction.
2. “Major” snowstorm. The Midwest and Northeast were hit by a large snowstorm late in the payroll survey week. This caused at least a few firms to reduce work hours and likewise kept at least some employees from reaching their workplaces. When we published our original payroll forecast, the National Oceanic and Atmospheric Administration (NOAA) had not yet issued a rating for the storm; it now has a preliminary categorization of “major” (the middle of five rankings), bigger than we expected. If we include a variable for snowstorm intensity in our models of employment, we find that a storm of this magnitude has an average impact in the neighborhood of 40,000-50,000 on reported payroll employment. We emphasize that this is quite uncertain, as we don’t have many data points (large snowstorms during the payroll survey week) to go on. Any weather effect should be fully unwound the subsequent month (i.e. if January were 50,000 below the underlying trend, February should be 50,000 above it), assuming of course that we don’t see another large snowstorm next week. Most of the snowstorm effect occurs in the construction and leisure/hospitality (hotels and restaurants) sectors, so job gains or losses in these two sectors, which have averaged -5,000 and +19,000 respectively over the past three months, will help us gauge the extent of any weather effect on the report.
When all is said and done, we haven’t changed our preliminary forecast for the employment report. We expect an increase in nonfarm payrolls of 175,000, with the unemployment rate at 9.5% (giving back a small part of its large drop in December), and average hourly earnings up 0.1%.
Why haven’t we changed our forecast this week? We’ve gotten better-than-expected news on the fundamentals (particularly online job advertising, the ADP report, and the ISM employment indexes), but worse-than-expected news on weather (the NOAA’s quantitative ranking of the snowstorm suggests a considerably bigger impact than we’d thought at first), and we think these are at least partly offsetting. So there is a lot of uncertainty, but it runs in both directions. In any case, in terms of market impact, we view the risks as skewed to the side of a “strong employment” reaction—weaker numbers are likely to be downplayed as the result of weather distortions, whereas strong numbers are likely to be viewed as evidence of an improving trend. Note that barring a sharp shift in the fundamental data or another big snowstorm, the February employment report is likely to look very strong, as it should benefit from mean reversion on the weather front.
One final consideration in Friday’s report: the Labor Department will indicate the extent of its annual “benchmark revision” to nonfarm payrolls. Each year, the Labor Department adjusts the level of payrolls the previous March to reflect a near-comprehensive count of unemployment insurance records up to that point. Last October, the Labor Department estimated that it would have to revise down the level of March 2010 payrolls by 366,000. A downward benchmark revision would in turn result in a downward revision to monthly changes since the previous benchmark in March 2009 (if the adjustment turned out to be 366,000, then the average monthly change between March 2009 and March 2010 would be revised down by about 30,000). The Labor Department will also adjust monthly changes since March 2010 to reflect its assessment of what the comprehensive data imply for more recent employment growth; typically these revisions are directionally similar but smaller in magnitude.
Thursday, February 3, 2011
Sellside Analysts Ramping Up Earnings Estimates As Management Guidance Plunges
Sellside Analysts Ramping Up Earnings Estimates As Management Guidance Plunges
Submitted by Tyler Durden on 02/02/2011 21:50 -0500
Insider Selling
One wonders who is right...
From BofA's Savita Subramanian:
Earnings estimate revision ratio continues to climb
The earnings revision ratio for the S&P 500 continued to increase in January, and the three-month ratio settled in at 1.7, above average optimism from the sell side. Sectors with the most positive ratios are Tech and Discretionary, and those with the most negative are Utilities and Telecom Services (p. 3). An above average and improving earnings revision ratio, which is what we have seen for the last couple of months, generally benefits lower quality stocks (Table 1).
But the guidance ratio is heading south
Management and analysts appear to be parting ways. The three-month management guidance ratio (upward to downward guidance) fell to 0.9 this month from 1.4 in December. The ratio generally declines in January, but this month’s drop is more extreme. Tech and Financials have the most positive 3-month guidance ratio, and Telecom Services and Materials the most negative. The direction of guidance has historically predicted the subsequent month’s earnings revision ratio, indicating future downward revisions to earnings
And some more bad news:
Sales optimism continues to lag earnings optimism
Analysts have not been as optimistic on sales as they have been on earnings over the last three months, and the sales forecast revision ratio dropped down to 1.0 (roughly its long-term average). More worrisome to us, the top line / bottom line gap reached a new high, with sales optimism lagging earnings optimism by the largest margin on record. Telecom Services and Tech have the most positive sales forecast revision ratios, Utilities and Materials the most negative.
Visually this divergence looks as follows:
Submitted by Tyler Durden on 02/02/2011 21:50 -0500
Insider Selling
One wonders who is right...
From BofA's Savita Subramanian:
Earnings estimate revision ratio continues to climb
The earnings revision ratio for the S&P 500 continued to increase in January, and the three-month ratio settled in at 1.7, above average optimism from the sell side. Sectors with the most positive ratios are Tech and Discretionary, and those with the most negative are Utilities and Telecom Services (p. 3). An above average and improving earnings revision ratio, which is what we have seen for the last couple of months, generally benefits lower quality stocks (Table 1).
But the guidance ratio is heading south
Management and analysts appear to be parting ways. The three-month management guidance ratio (upward to downward guidance) fell to 0.9 this month from 1.4 in December. The ratio generally declines in January, but this month’s drop is more extreme. Tech and Financials have the most positive 3-month guidance ratio, and Telecom Services and Materials the most negative. The direction of guidance has historically predicted the subsequent month’s earnings revision ratio, indicating future downward revisions to earnings
And some more bad news:
Sales optimism continues to lag earnings optimism
Analysts have not been as optimistic on sales as they have been on earnings over the last three months, and the sales forecast revision ratio dropped down to 1.0 (roughly its long-term average). More worrisome to us, the top line / bottom line gap reached a new high, with sales optimism lagging earnings optimism by the largest margin on record. Telecom Services and Tech have the most positive sales forecast revision ratios, Utilities and Materials the most negative.
Visually this divergence looks as follows:
Wednesday, February 2, 2011
The United Nations Declares War On The U.S. Dollar And Publicly Calls For The Establishment Of A New World Currency
Submitted by: Francis Soyer
This is an older article but one worth reviewing as we watch the dollar index continue to drop like a stone. The cause of course another bubble created by the Federal reserve system so it create an artificial wealth effect then burst it and blow up the U.S. economy even further than it already is. Originally published in July of 2010.
The United Nations Declares War On The U.S. Dollar And Publicly Calls For The Establishment Of A New World Currency
Are you ready for a world currency? If the United Nations has anything to say about it, that is exactly what we are all going to have shoved down our throats. A new United Nations report released on Tuesday essentially declares war on the U.S. dollar and publicly calls on the nations of the world to abandon it as the global reserve currency. This new report entitled "The U.N. World Economic and Social Survey 2010" is one of the most blatant attempts yet that we have seen from a major international organization to move us in the direction of a world currency. For years it was denial after denial after denial that a global currency was being considered. Of course we knew all along by reading their policy papers that the eventual goal of the globalists was indeed to move us over to a global currency. Finally, in just the past year, the International Monetary Fund's special drawing rights (SDRs) were promoted by the G20 as "an international reserve asset" that could be used as a unit of payment for IMF loans. SDRs are currently made up of a basket of various currencies from around the world, but now there are much bigger plans for the SDRs.
According to the new U.N. report, the U.S. dollar should be abandoned in favor of a new world currency based on these SDRs....
"A new global reserve system could be created, one that no longer relies on the United States dollar as the single major reserve currency."
So why abandon the U.S. dollar? Well, the U.N. report says that we must abandon it because it has not been "stable" enough....
"The dollar has proved not to be a stable store of value, which is a requisite for a stable reserve currency."
But of course it has not been stable!
It is the very same globalists that are pushing for this new world currency that have been behind the destruction of not only the U.S. dollar but all paper currencies around the world.
In fact, there are many who are speculating that the recession that the world economy is now being "pushed" into is actually a contrived crisis which is designed to pave the way for the grand solution that the globalists have wanted all along.
So exactly what is that grand solution?
During a speech back in May, IMF chief Dominique Strauss-Kahn called for the introduction of a global currency backed by a global central bank which would act as the "lender of last resort" in the event of a severe economic crisis.
That is what the globalists have always wanted - a global currency and a global central bank that we all pay taxes to.
Right now the world is not likely to go for it, but if the upcoming recession (or depression) is deep enough, then the would might just be willing to accept a global currency and a global central bank.
You see, it is the exact same problem/reaction/solution paradigm that the globalists have used time after time after time to get their way.
Even now, globalist organizations are lining up their proposals for global taxes that they wish to impose on all of us as we recently described on one of our sister sites....
*The World Health Organization recently announced that it is ready to impose global taxes on all of us. The World Health Organization says that it needs a lot more money and that it has some creative ideas for how to get it. Two of their main ideas for "raising revenue" are a global tax on Internet use and a global tax on paying bills online. These taxes would go directly to the World Health Organization.
*The IMF is actually calling for two new global taxes. One would be an international deposit insurance tax, and the other would be a tax on the profits of financial institutions worldwide. The IMF says that the funds would be used by them to prevent another major financial crisis.
So are you ready for a world currency and a world central bank that you will pay your world taxes to?
Malaysian economist Jomo Kwame Sundaram, the U.N. assistant secretary general for economic development, admitted during a news conference that "there's going to be resistance" to the idea of a world currency.
Gold Market Commentary: Buyer Of 2,000 December 1,800 Calls Emerges
Gold Market Commentary: Buyer Of 2,000 December 1,800 Calls Emerges
Submitted by Tyler Durden on 02/01/2011 19:17 -0500
From FMX Connect
Summary
April Gold settled at $1343.00 per 100 troy ounces, a gain of $5.80 for the day, after swinging from $8.00 up to $7.00 down and back. Volatility was unchanged in the backs and lower in the fronts. Call Skew and Call Tails increased.
Active Options
J 1250 P trds 7.5 with futures 1000x
Z 1800 C trds 13.5-14 2000x
J 1500 C trd 1.70-2.20 1500x
Analysis: Skew firmed up today with calls being bought in December and August. Puts were sold in April, June, August and October. Volatility was roughly unchanged on the day but there is a definite change in tenor in risk reversal trading. This was in large part a reaction to a fund buying December 1800 Cs live, approx. 2000 times. Moving forward, nothing about today’s action gives a directional hint except that December calls are being bought once again.
Commentary: The market opened very strong and then washed out, looking like a trend day lower. The bounce through unchanged came on the back of the December call buying. Our guess is that call buyer was also positioning himself in futures. Whether he’s right or not, we don’t know. Right now we are sticking to our guns and don’t expect to see volatility pop until we settle above 1346 or below 1325.
Submitted by Tyler Durden on 02/01/2011 19:17 -0500
From FMX Connect
Summary
April Gold settled at $1343.00 per 100 troy ounces, a gain of $5.80 for the day, after swinging from $8.00 up to $7.00 down and back. Volatility was unchanged in the backs and lower in the fronts. Call Skew and Call Tails increased.
Active Options
J 1250 P trds 7.5 with futures 1000x
Z 1800 C trds 13.5-14 2000x
J 1500 C trd 1.70-2.20 1500x
Analysis: Skew firmed up today with calls being bought in December and August. Puts were sold in April, June, August and October. Volatility was roughly unchanged on the day but there is a definite change in tenor in risk reversal trading. This was in large part a reaction to a fund buying December 1800 Cs live, approx. 2000 times. Moving forward, nothing about today’s action gives a directional hint except that December calls are being bought once again.
Commentary: The market opened very strong and then washed out, looking like a trend day lower. The bounce through unchanged came on the back of the December call buying. Our guess is that call buyer was also positioning himself in futures. Whether he’s right or not, we don’t know. Right now we are sticking to our guns and don’t expect to see volatility pop until we settle above 1346 or below 1325.
Governor Cuomo Declares New York "Functionally Bankrupt"
Governor Cuomo Declares New York "Functionally Bankrupt" , Seeks Spending Cuts; California Governor Jerry Brown Cites Egypt, Demand Tax Hikes
Posted: 01 Feb 2011 04:52 PM PST
In an interesting compare and contrast scenario, democratic governors from the two largest states have vastly differing ideas regarding what to do about huge budget gaps. New York Governor Andrew Cuomo seeks spending cuts on schools and Medicaid, while California Governor Jerry Brown wants to ram through tax hikes.
The LA Times reports Brown cites unrest in Egypt to make his case for budget vote
Citing the pro-democracy unrest in Egypt and Tunisia, Gov. Jerry Brown called it “unconscionable” that GOP legislators are vowing to block his attempt to ask voters to extend tax hikes to balance the budget.
“When democratic ideals and calls for the right to vote are stirring the imagination of young people in Egypt and Tunisia and other parts of the world, we in California can’t say now is the time to block a vote of the people,” Brown said in his first State of the State address in nearly 30 years.
He said the budget has tough choices but that the people “have a right to vote” on the package. He challenged both parties to take the difficult votes necessary to balance the budget.
Jerry Brown Is Disingenuous
The moment a vote is put to the people, the teachers' unions, the police and fire unions, the prison unions, the transit unions, and in fact every union in the state will bombard taxpayers with promises of Armageddon if tax hikes are not approved.
Money for those ads will come from taxpayers of course.
Hopefully Republican tell Brown to go to hell, and if not, then hopefully taxpayers tell the unions to go to hell.
California does not have a revenue problem, it has a spending problem. The way you fix a spending problem is to cut spending. Until the governor is willing to do that Republican should hold their ground.
Cuomo’s Budget Cuts Spending on Schools and Medicaid
The New York Times reports Cuomo’s Budget Cuts Spending on Schools and Medicaid.
Declaring New York State “functionally bankrupt,” Gov. Andrew M. Cuomo proposed a $132.9 billion budget on Tuesday that would reduce year-to-year spending for the first time in more than a decade, sharply cut back projected spending on education and health care, and cut the budget for state agencies by more than half a billion dollars in the next fiscal year.
In a novel and potentially risky move, Mr. Cuomo’s budget defers specific Medicaid cuts to the work of a task force he appointed last month and which includes lawmakers and representatives of labor and health care interests. The task force’s recommendations are due in one month — time that may buy Mr. Cuomo protection from the withering attack advertisements that those same interests typically unleash on governors seeking Medicaid cuts.
Presenting his budget to lawmakers and other officials at a state theater in Albany, Mr. Cuomo sounded stern, even angry, about the way past governors and lawmakers have built inexorable spending growth into future budgets, even as he urged the Legislature to join him in reigning in government expenditures.
He decried current budgeting practices as a “special interest protection program” that led to too much spending with too little accountability for performance, and called for a return to what he described as “reality-based” budgeting.
“It’s not about the industry of government,” Mr. Cuomo said. “It’s not about the bureaucracy of programs. Government is there to serve people.”
like Mr. Paterson, Mr. Cuomo is proposing to eliminate the annual cash subsidy that New York City receives through a state program, setting up a battle with Mayor Michael R. Bloomberg.
Offering a further glimpse of how he will seek to negotiate with the Legislature and outmaneuver unions and other special interests that dominate the budget process in Albany, Mr. Cuomo will seek agreement with lawmakers to reduce spending on adult and juvenile prisons.
But his proposal would defer decisions on which of the state’s dozens of adult prison facilities to close to a task force of lawmakers and state prison officials. Should the task force fail to agree on prison closings, under Mr. Cuomo’s proposal, the commissioner of the corrections department would be empowered to make the decisions unilaterally.
Similarly, the budget proposal would empower the executive branch to unilaterally make any Medicaid cuts that Mr. Cuomo’s task force is unable to agree on its own.
Mr. Cuomo is seeking to reduce the budget for state operations, among the larger pots of spending, by 10 percent, one of the steepest proportional reductions to any area of the budget. About $100 million in savings would be sought through agency mergers, but the bulk of the amount, $450 million, is intended to come through what Mr. Cuomo’s budget proposal terms a “Labor Management Partnership.”
Mr. Cuomo’s budget also offers a more expansive glimpse of his plans to redesign New York’s sprawling state bureaucracy, with plans to merge 11 existing agencies or authorities into just four entities. Mr. Cuomo will seek to consolidate the department of corrections, one of New York’s largest agencies, with the state division of parole, and to move several agencies that handle programs for domestic violence and crime victims into the state division of criminal justice services.
Mr. Cuomo also proposes to reduce projected spending on the State University of New York, the City University of New York and their community colleges by about 10 percent, which would save more than $200 million. The budget saves another $135 million by eliminating subsidies for SUNY’s teaching hospitals at Brooklyn, Stony Brook and Syracuse.
Band-Aid Approach
I applaud all of those moves, but most are nothing but Band-Aids. Cuomo needs to get at the root of the problem. To do that he needs to end collective bargaining of public unions, make New York a right to work state, kill prevailing wage laws, and make sure all new state employees do not get defined benefit plans, and go to merit pay for teachers.
Those moves would not only help the state, but would ease the pain of cuts on New York City. Moreover, if he did all that, I bet Republicans would agree to some tax hikes. The same applies to California Governor Brown.
Governor Cuomo is better than expected (but still off the mark). Meanwhile, Governor Moonbeam remains in outer space in regards to addressing California's problems.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Posted: 01 Feb 2011 04:52 PM PST
In an interesting compare and contrast scenario, democratic governors from the two largest states have vastly differing ideas regarding what to do about huge budget gaps. New York Governor Andrew Cuomo seeks spending cuts on schools and Medicaid, while California Governor Jerry Brown wants to ram through tax hikes.
The LA Times reports Brown cites unrest in Egypt to make his case for budget vote
Citing the pro-democracy unrest in Egypt and Tunisia, Gov. Jerry Brown called it “unconscionable” that GOP legislators are vowing to block his attempt to ask voters to extend tax hikes to balance the budget.
“When democratic ideals and calls for the right to vote are stirring the imagination of young people in Egypt and Tunisia and other parts of the world, we in California can’t say now is the time to block a vote of the people,” Brown said in his first State of the State address in nearly 30 years.
He said the budget has tough choices but that the people “have a right to vote” on the package. He challenged both parties to take the difficult votes necessary to balance the budget.
Jerry Brown Is Disingenuous
The moment a vote is put to the people, the teachers' unions, the police and fire unions, the prison unions, the transit unions, and in fact every union in the state will bombard taxpayers with promises of Armageddon if tax hikes are not approved.
Money for those ads will come from taxpayers of course.
Hopefully Republican tell Brown to go to hell, and if not, then hopefully taxpayers tell the unions to go to hell.
California does not have a revenue problem, it has a spending problem. The way you fix a spending problem is to cut spending. Until the governor is willing to do that Republican should hold their ground.
Cuomo’s Budget Cuts Spending on Schools and Medicaid
The New York Times reports Cuomo’s Budget Cuts Spending on Schools and Medicaid.
Declaring New York State “functionally bankrupt,” Gov. Andrew M. Cuomo proposed a $132.9 billion budget on Tuesday that would reduce year-to-year spending for the first time in more than a decade, sharply cut back projected spending on education and health care, and cut the budget for state agencies by more than half a billion dollars in the next fiscal year.
In a novel and potentially risky move, Mr. Cuomo’s budget defers specific Medicaid cuts to the work of a task force he appointed last month and which includes lawmakers and representatives of labor and health care interests. The task force’s recommendations are due in one month — time that may buy Mr. Cuomo protection from the withering attack advertisements that those same interests typically unleash on governors seeking Medicaid cuts.
Presenting his budget to lawmakers and other officials at a state theater in Albany, Mr. Cuomo sounded stern, even angry, about the way past governors and lawmakers have built inexorable spending growth into future budgets, even as he urged the Legislature to join him in reigning in government expenditures.
He decried current budgeting practices as a “special interest protection program” that led to too much spending with too little accountability for performance, and called for a return to what he described as “reality-based” budgeting.
“It’s not about the industry of government,” Mr. Cuomo said. “It’s not about the bureaucracy of programs. Government is there to serve people.”
like Mr. Paterson, Mr. Cuomo is proposing to eliminate the annual cash subsidy that New York City receives through a state program, setting up a battle with Mayor Michael R. Bloomberg.
Offering a further glimpse of how he will seek to negotiate with the Legislature and outmaneuver unions and other special interests that dominate the budget process in Albany, Mr. Cuomo will seek agreement with lawmakers to reduce spending on adult and juvenile prisons.
But his proposal would defer decisions on which of the state’s dozens of adult prison facilities to close to a task force of lawmakers and state prison officials. Should the task force fail to agree on prison closings, under Mr. Cuomo’s proposal, the commissioner of the corrections department would be empowered to make the decisions unilaterally.
Similarly, the budget proposal would empower the executive branch to unilaterally make any Medicaid cuts that Mr. Cuomo’s task force is unable to agree on its own.
Mr. Cuomo is seeking to reduce the budget for state operations, among the larger pots of spending, by 10 percent, one of the steepest proportional reductions to any area of the budget. About $100 million in savings would be sought through agency mergers, but the bulk of the amount, $450 million, is intended to come through what Mr. Cuomo’s budget proposal terms a “Labor Management Partnership.”
Mr. Cuomo’s budget also offers a more expansive glimpse of his plans to redesign New York’s sprawling state bureaucracy, with plans to merge 11 existing agencies or authorities into just four entities. Mr. Cuomo will seek to consolidate the department of corrections, one of New York’s largest agencies, with the state division of parole, and to move several agencies that handle programs for domestic violence and crime victims into the state division of criminal justice services.
Mr. Cuomo also proposes to reduce projected spending on the State University of New York, the City University of New York and their community colleges by about 10 percent, which would save more than $200 million. The budget saves another $135 million by eliminating subsidies for SUNY’s teaching hospitals at Brooklyn, Stony Brook and Syracuse.
Band-Aid Approach
I applaud all of those moves, but most are nothing but Band-Aids. Cuomo needs to get at the root of the problem. To do that he needs to end collective bargaining of public unions, make New York a right to work state, kill prevailing wage laws, and make sure all new state employees do not get defined benefit plans, and go to merit pay for teachers.
Those moves would not only help the state, but would ease the pain of cuts on New York City. Moreover, if he did all that, I bet Republicans would agree to some tax hikes. The same applies to California Governor Brown.
Governor Cuomo is better than expected (but still off the mark). Meanwhile, Governor Moonbeam remains in outer space in regards to addressing California's problems.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Tuesday, February 1, 2011
Middle East Revolutions
Submitted by: Francis Soyer
The “revolutions” that have started in the Middle East are all part of a plot by the families that own the Federal Reserve Board, according to sources deep within the system. As a part of this plan, the series of orchestrated replacements of puppets disguised as “revolutions” that started with Tunisia and moved on to Egypt will continue to unfold in country after country over the coming weeks and months. The end game is to try to provoke major unrest in the US that will lead to the declaration of martial law followed by the use of mercenary armies to enforce fascist rule there. What the Feds do not realize is that all they are doing is exposing their entire network and that they will be stopped by the Pentagon and other agencies. The private armies now deployed in Afghanistan and Iraq will not be allowed to arrest American citizens and put them into FEMA camps, period.
The move by the Federal Reserve Board crime syndicate is part of a power grab within very esoteric levels of the secret power structure of the planet, according to sources who cannot be identified without putting their lives in danger.
The sources explained the nature of the secret government in order to explain the exact nature of the power grab that is under way. At the very top of the secret pyramid can be found an individual known as M1, according to them and other sources. Beneath M1 is what is known as M3 and it consists of three people. That is followed by M5 (five people) and then by M9 (number unknown but now believed to be only 6-7 people).
Underneath M9 is a group of 555 people with varying ranks (with 33 being the lowest) who are usually leaders of countries or large organizations. Most 33rd degree freemasons are part of this group.
Below them can be found the visible structures of the government with the UN at the top, the EU and the World Bank on the next level and below that the BIS, US corporate government and the Federal Reserve Board.
In a parallel secret structure with levels ranging from 7 to 13, meanwhile, can be found organizations like the CIA, the NSA, Interpol etc. They act as legal enforcers and protectors of the system.
According to the sources, if you super-impose organizational charts of the visible and invisible power structures on each other, you end up with a Star of David.
The original M1 was President Soekarno of Indonesia. He was removed as part of a power grab by the banking cartel headed by the Rothschilds, the Rockefellers and other families that own the Federal Reserve Board.
A new M1 was put in place after Soekarno and he stayed in that role for 33 years, or until September 2001. However, there was a de facto lack of leadership within the secret government since 1995 when the Bretton Woods mandate of the British, French and Americans ran out.
Since that time there has been an ongoing effort by the banking cartel headed by the Rothschilds to replace the entire top of the pyramid, starting with M1. The result has been a leadership vacuum and secret power struggle, punctuated by not so secret events like 911 and the invasions of Iraq and Afghanistan
The Russians were never part of this system. Instead, they operated a clearing house with the Western banks known as Alpha Omega station. They will be invited to join the new system that is being prepared.
What is now happening is that a new M1 has been selected and there has been a major infusion of new faces into the ranks up to M9. They say they need to keep their identities secret for their own protection because so much greed and evil gravitates towards the top of the financial system.
The investigations of the group that attempted to grab all the power structures from M9 down to M33 have led to members of the Rothschild family, the Bank of England, the World Economic Forum and the Vatican bank.
It is this group that built up the private armies now killing innocent people in Afghanistan, Iraq and elsewhere. They want to bring those armies into the US as part of a desperate gambit to keep themselves in power. They are also still trying to take over the planet and kill billions of people. They still think they cannot be stopped.
They have been trying very hard to engineer a food crisis and start hunger revolutions throughout the world. They have also been spreading diseases and poisons.
What many of them do not realize is that they will be arrested before they can carry out their plan.
The question, of course, is why and how was the new M1-M9 leadership selected. They say they were selected on a system of merit and need to keep secret to prevent assassination. They also say the M1 is not a secret dictator but rather a person who puts the final signature that frees money to carry out any consensus reached by the visible governments. They promise the new system will set humanity free and stop the rape of the planet.
The Fed and Job Creation by Ron Paul
The Fed and Job Creation Unemployment continues to plague our economy. In spite of constant claims that we have just turned the corner into recovery, the jobs reports remain grim with no real signs of improvement. While Keynesian economists and big government apologists scratch their heads about persistent unemployment in spite of unprecedented government “investment” in the economy, free market economists understand the problem perfectly well. In short, they understand that we are looking to the Federal Reserve to solve an unemployment crisis that the Fed itself largely created.
For example, the Fed is supposed to maintain full employment as half of its “dual mandate”. But the Fed simply has the wrong tools to do this. In fact, its credit expansion and manipulation of interest rates cause harm when they are applied to “help” the economy. As we saw with the housing boom and bust, Fed-created inflation cannot be sustained without harmful consequences. The Fed’s artificial boom led to the unemployment we’re suffering today. The Fed is not a small business or a manufacturer that creates value or increases productivity to sustain real job growth. It literally destroys value by printing more money, and distributing it through sweetheart deals to well connected banks and corporations (including foreign banks!). The only success the Fed has had in maintaining full employment has been on Wall Street where it props up crony banks and investment houses to prevent them from going bankrupt as they should. Instead, they survive to malinvest another day while their executives enjoy jackpot bonuses.
The Fed also pumped up employment in the housing industry with artificially low interest rates that created an unsustainable demand for housing. Millions jumped into this sector when the money was loose and the bubble inflating. Besides the many who bought houses they could not afford and now face foreclosure, there were also those who became employed in housing related fields. These people invested time and money in training and spent years establishing careers in real estate, mortgage lending, construction and contracting, careers that all vanished into thin air with the burst of the bubble. Now they face considerable disruption in their lives as they struggle with unemployment, underemployment and decisions about retraining for different careers. This amounts to a tremendous amount of unnecessary waste that would not have occurred had the housing industry been allowed to develop naturally according to market demands.
Jobs are properly created by entrepreneurs who are willing to work hard and take calculated risks. Jobs are also created through real increases in productivity, resulting from re-invested profits or conservative borrowing at market interest rates. But the Fed has made those risks impossible to calculate, and made borrowing money artificially cheap. As a result, economic growth has been chilled while unemployment skyrockets.
Until those in power understand the harm they do with central economic planning, we will continue to slide backwards and lose jobs. The Fed needs to stay out of the job creating business altogether and the federal government needs to focus on its constitutional duties. Just when we need government to back off, we hear about more government intervention in the economy in the form of more spending, only they call it “investment”. It is more properly called “malinvestment”, and the resources that are funneled into industries by government policies will only hurt employment more in the long run.
Frontrunning: February 1
Frontrunning: February 1
Submitted by Tyler Durden on 02/01/2011 08:25 -0500
•Bernanke Misses Baseball in Battle for Euro Debt With Fed LISCC (Bloomberg)
•Egyptian army rules out force against protesters (FT)
•Federal Judge Rules That Health Law Violates Constitution (NYT)
•EU Said to Near Agreement on Bailout Fund Buying New Bonds (Bloomberg)
•Even a caveman could have fixed the system (NY Post)
•Whitney Municipal-Bond Apocalypse Is Short on Default Specifics (Bloomberg)
•U.S. Ambassador to China Plans Exit (WSJ)
•One in Five Mortgages Default Again After Modification (Bloomberg)
•Australia evacuates coastal cities in path of cyclone (Reuters)
•Bank of America Can Proceed With Nevada Foreclosures, Judge Says (Bloomberg)
Submitted by Tyler Durden on 02/01/2011 08:25 -0500
•Bernanke Misses Baseball in Battle for Euro Debt With Fed LISCC (Bloomberg)
•Egyptian army rules out force against protesters (FT)
•Federal Judge Rules That Health Law Violates Constitution (NYT)
•EU Said to Near Agreement on Bailout Fund Buying New Bonds (Bloomberg)
•Even a caveman could have fixed the system (NY Post)
•Whitney Municipal-Bond Apocalypse Is Short on Default Specifics (Bloomberg)
•U.S. Ambassador to China Plans Exit (WSJ)
•One in Five Mortgages Default Again After Modification (Bloomberg)
•Australia evacuates coastal cities in path of cyclone (Reuters)
•Bank of America Can Proceed With Nevada Foreclosures, Judge Says (Bloomberg)
Sunday, January 30, 2011
The Nature And Origin Of The State
Guest Post: The Nature And Origin Of The State
Submitted by Tyler Durden on 01/29/2011 12:41 -0500
Guest PostKarl Popper
The next in a continuing series (most recently: Law and the State).
Submitted by Free Radical
The Nature and Origin of the State
The idea that the State originated to serve any kind of social purpose is completely unhistorical. – Albert Jay Nock
It is imperative that we understand, first of all, that “Everything the state is capable of doing it does through compulsion and the application of force.” Even apologists for the state cannot deny this fact.
Neither can its apologists deny (at least convincingly) that “every State has been and is a class State, and every theory of the State has been and is a class theory,”i acknowledgement of which can be found as far back as Plato, who, having addressed the settle-ment of formerly nomadic tribes in The Statesman, depicts – with obvious approval – their conquest and subjugation in The Republic:
Plato gives us a mythological yet very pointed description of the conquest itself, when dealing with the origin of the “earthborn,” the ruling class of the best city. Their victorious march into the city, previously founded by the tradesmen and workers, it described as follows: “After having armed and trained the earthborn, let us now make them advance, under the command of the guardians, till they ar-rive in the city. Then let them look round to find out the best place for their camp – the spot that is most suitable for keeping down the inhabitants, should anyone show unwillingness to obey the law, and for holding back external enemies who may come down like wolves on the fold.” This short but triumphant tale of the subjugation of a sedentary population by a conquering war horde … must be kept in mind when we interpret Plato’s reiterated insistence that good rulers ... are pa-triarchal shepherds of men and that the true political art, the art of ruling, is a kind of herdsmanship, i.e., the art of managing and keeping down human cattle.ii
Even so, Plato’s pupil Aristotle rejected this “art,” placing the origin of the state more palatably, albeit mistakenly, at the end of a purely organic process:
The belief in the kinship origin of the State has been among the most deeply rooted manifestations of the Western faith in development continuity. The popularity of the belief owes much to Aristotle’s celebrated triadic scheme of evolution – from family to community to State – and has been nourished in modern times by frequent appeals to irrelevant and historically unconnected ethnographic materials. As is true in so many other alleged instances of developmental continuity, the fact of logical continui-ty has been converted into the supposition of historical continuity within a specific area or chronology.iii
Moreover, not only was it assumed, following Aristotle, that “from such an original social order … there had developed, through gradual differentiation, the fully developed State with its class hierarchy;”iv it was also assumed that said order developed because all productive land had been settled:
All the teachers of natural law, etc., have unanimously declared that the dif-ferentiation into income-receiving classes and propertyless classes can only take place when all fertile lands have been occupied. For so long as man has ample opportunity to take up unoccupied land, “no one,” says Turgot, “would think of entering the service of another” …
... The philosophers of natural law, then, assumed that complete occupancy of the ground must have occurred quite early, because of the natural increase of an originally small population. They were under the impression that at their time, in the eighteenth century, it had taken place many centuries previous, and they na-ively deduced the existing class aggroupment from the assumed conditions of that long-past point in time. v
Never questioning their assumptions, it simply did not occur to these thinkers that they could
… determine with approximate accuracy the amount of land of average fertility in the temperate zone, and also what amount is sufficient to enable a family of peas-ants to exist comfortably, or how much such a family [could] work with its own forces, without engaging outside help or permanent farm servants. … Let us as-sume that, in these modern times, thirty morgen (equal to twenty acres) for the average peasant suffices to support a family.
… [T]here are still on the earth’s surface, seventy-three billion, two hundred million hectares (equal to on hundred eighty billion, eight hundred eighty million and four hundred sixteen thousand acres); dividing into the first amount the num-ber of human beings [at the time, 1914]…viz., one billion, eight hundred million, every family of five persons could possess about thirty morgen (equal to eighteen and a half acres), and still leave about two-thirds of the planet unoccupied.
If, therefore, purely economic causes are ever to bring about a differentiation into classes by the growth of a propertyless laboring class, the time has not yet ar-rived. …
… As a matter of fact, however, for centuries past, in all parts of the world, we have had a class-state, with possessing classes on top and propertyless laboring classes at the bottom, even when population was much less dense than it is today. Now it is true that the class-state can arise only where all fertile acreage has been occupied completely; and since
… all the ground is not occupied economically, this must mean that it has been preempted politically. Since land could not have acquired “natural scarcity,” the scarcity must have been “legal.” This means that the land has been preempted by a ruling class against its subject class, and settlement prevented. Therefore, the State, as a class-state, can have originated in no other way than through conquest and subjugation.vi
Thus, while it would be too much to say that property is theft, it is not at all be too much to say that insofar as people have historically found themselves without property, it is not because those “best endowed with strength, wisdom, capacity for saving, industry and caution, slowly acquire[d] a basic amount of real or movable property; while the stu-pid and less efficient, and those given to carelessness and waste, remain[ed] without pos-sessions.”vii Rather, it is because one group simply forced itself on another
...with the sole purpose of regulating the dominion of the victorious group over the vanquished, and securing itself against revolt from within and attacks from abroad. Teleologically, this dominion had no other purpose than the economic ex-ploitation of the vanquished by the victors. viii
And thus do we come once again to the all-important distinction between society and the state:
There are two fundamentally opposed means whereby man, requiring suste-nance, is impelled to obtain the necessary means for satisfying his desires. There are work and robbery, one’s own labor and the forcible appropriation of the labor of others … the “economic means” … and the “political means.”
The state is an organization of the political means. No state, therefore, can come into being until the economic means has created a definite number of objects for the satisfaction of needs, which objects may be taken away or appropriated by warlike robbery. ix
What society giveth, in other words, the state taketh away, first through territorial conquest; then through the establishment of a monopoly on the use of force; and, finally, through the use of said monopoly to confiscate the inhabitants’ property – the “objects” created “for the satisfaction of needs” – via the legalized theft of taxation.
And no matter how successful it has been in indoctrinating its people to believe oth-erwise, the American state is in no way an exception. On the contrary, it is thoroughly an organization of the political means, as were the colonies that preceded it:
The first fortunes on the virgin continent were out-and-out political creations – huge tracts of [conquered] land and lucrative trading privileges arbitrarily bestowed by the British and Dutch crowns upon favorite individuals and com-panies. ... The early royal grants … were the sole property titles of the newly created landed aristocrats.x
While the received truth regarding the subsequent creation of a constitutional republic is decidedly different – nothing less than a miracle, in fact – the real truth is that the United States Constitution, like all constitutions, was “not instituted to limit government but rather to enhance the political power of an elite that [sought] to entrench itself.” After all, the United States Constitution was written by and for a small class of property-owning adult white males, who limited the vote almost exclusively to themselves and, in the process, massively centralized what had been a loose federation of newly independent states.
Thus, instead of the “model for the protection of man in a state of freedom and order” that Jefferson imagined it to be, the American state, both before and after its founding, was a model of conquest and subjugation – not only of the continent’s native inhabitants and the millions of others imported from another continent but of the human detritus endlessly washing up on its shores.xi As such, the American state is simply another state and, like any state, is therefore “an evil inflicted on men by men” that persists solely through the indoctrinated enslavementxii of its people.
And to make matters worse, even some who are not indoctrinated but, on the contrary, recognize the state as the evil that it is, compound that evil by maintaining that the preservation of society nonetheless “justifies the action of the organs of the state.”
This is a very serious proposition – so serious, in fact, that the very foundation of human morality hangs in the balance, and with it the very viability of civil society. If, therefore, humanity is to have any hope of ridding itself of its nemesis, it must be shown that because the state is inherently evil, there can therefore be no justification for its existence.
So to this task we turn next, via another brief foray into metaphysics: “Evil and the State.”
-------------------------------------------------------------------------------
i Franz Oppenheimer, The State, Copley Publishing, 1914, p. 4; online version here.
ii Karl Popper, The Open Society and Its Enemies, Princeton University Press, New Jersey, 1962, 1966, p. 49.
iii Robert Nisbet, The Quest for Community: A Study in the Ethics of Order and Freedom, ICS Press, 1990 (Oxford University, 1953), pp. 90 and 91.
iv Ibid., Oppenheimer, p. xix.
v Ibid., p. 6.
vi Ibid., pp. 6 and 7.
vii Ibid., Oppenheimer, p. 5.
viii Ibid., p. 8.
ix Ibid., pp. 12 and 13.
x Ferdinand Lundberg, America’s Sixty Families, Vanguard Press, 1937, p. 50.
xi “[P]oor laborers will be so plenty as to render slavery useless.” – Revolutionary Connecticutian Oliver Ellsworth replying to revolutionary Virginian George Mason, as quoted by Forrest McDonald in Novus Ordo Seclorum: The Intellectual Origins of the Constitution, the University Press of Kansas, 1985, p. 51.
xii “None are more hopelessly enslaved than those who falsely believe they are free.” – Johann Wolfgang von Goethe
Submitted by Tyler Durden on 01/29/2011 12:41 -0500
Guest PostKarl Popper
The next in a continuing series (most recently: Law and the State).
Submitted by Free Radical
The Nature and Origin of the State
The idea that the State originated to serve any kind of social purpose is completely unhistorical. – Albert Jay Nock
It is imperative that we understand, first of all, that “Everything the state is capable of doing it does through compulsion and the application of force.” Even apologists for the state cannot deny this fact.
Neither can its apologists deny (at least convincingly) that “every State has been and is a class State, and every theory of the State has been and is a class theory,”i acknowledgement of which can be found as far back as Plato, who, having addressed the settle-ment of formerly nomadic tribes in The Statesman, depicts – with obvious approval – their conquest and subjugation in The Republic:
Plato gives us a mythological yet very pointed description of the conquest itself, when dealing with the origin of the “earthborn,” the ruling class of the best city. Their victorious march into the city, previously founded by the tradesmen and workers, it described as follows: “After having armed and trained the earthborn, let us now make them advance, under the command of the guardians, till they ar-rive in the city. Then let them look round to find out the best place for their camp – the spot that is most suitable for keeping down the inhabitants, should anyone show unwillingness to obey the law, and for holding back external enemies who may come down like wolves on the fold.” This short but triumphant tale of the subjugation of a sedentary population by a conquering war horde … must be kept in mind when we interpret Plato’s reiterated insistence that good rulers ... are pa-triarchal shepherds of men and that the true political art, the art of ruling, is a kind of herdsmanship, i.e., the art of managing and keeping down human cattle.ii
Even so, Plato’s pupil Aristotle rejected this “art,” placing the origin of the state more palatably, albeit mistakenly, at the end of a purely organic process:
The belief in the kinship origin of the State has been among the most deeply rooted manifestations of the Western faith in development continuity. The popularity of the belief owes much to Aristotle’s celebrated triadic scheme of evolution – from family to community to State – and has been nourished in modern times by frequent appeals to irrelevant and historically unconnected ethnographic materials. As is true in so many other alleged instances of developmental continuity, the fact of logical continui-ty has been converted into the supposition of historical continuity within a specific area or chronology.iii
Moreover, not only was it assumed, following Aristotle, that “from such an original social order … there had developed, through gradual differentiation, the fully developed State with its class hierarchy;”iv it was also assumed that said order developed because all productive land had been settled:
All the teachers of natural law, etc., have unanimously declared that the dif-ferentiation into income-receiving classes and propertyless classes can only take place when all fertile lands have been occupied. For so long as man has ample opportunity to take up unoccupied land, “no one,” says Turgot, “would think of entering the service of another” …
... The philosophers of natural law, then, assumed that complete occupancy of the ground must have occurred quite early, because of the natural increase of an originally small population. They were under the impression that at their time, in the eighteenth century, it had taken place many centuries previous, and they na-ively deduced the existing class aggroupment from the assumed conditions of that long-past point in time. v
Never questioning their assumptions, it simply did not occur to these thinkers that they could
… determine with approximate accuracy the amount of land of average fertility in the temperate zone, and also what amount is sufficient to enable a family of peas-ants to exist comfortably, or how much such a family [could] work with its own forces, without engaging outside help or permanent farm servants. … Let us as-sume that, in these modern times, thirty morgen (equal to twenty acres) for the average peasant suffices to support a family.
… [T]here are still on the earth’s surface, seventy-three billion, two hundred million hectares (equal to on hundred eighty billion, eight hundred eighty million and four hundred sixteen thousand acres); dividing into the first amount the num-ber of human beings [at the time, 1914]…viz., one billion, eight hundred million, every family of five persons could possess about thirty morgen (equal to eighteen and a half acres), and still leave about two-thirds of the planet unoccupied.
If, therefore, purely economic causes are ever to bring about a differentiation into classes by the growth of a propertyless laboring class, the time has not yet ar-rived. …
… As a matter of fact, however, for centuries past, in all parts of the world, we have had a class-state, with possessing classes on top and propertyless laboring classes at the bottom, even when population was much less dense than it is today. Now it is true that the class-state can arise only where all fertile acreage has been occupied completely; and since
… all the ground is not occupied economically, this must mean that it has been preempted politically. Since land could not have acquired “natural scarcity,” the scarcity must have been “legal.” This means that the land has been preempted by a ruling class against its subject class, and settlement prevented. Therefore, the State, as a class-state, can have originated in no other way than through conquest and subjugation.vi
Thus, while it would be too much to say that property is theft, it is not at all be too much to say that insofar as people have historically found themselves without property, it is not because those “best endowed with strength, wisdom, capacity for saving, industry and caution, slowly acquire[d] a basic amount of real or movable property; while the stu-pid and less efficient, and those given to carelessness and waste, remain[ed] without pos-sessions.”vii Rather, it is because one group simply forced itself on another
...with the sole purpose of regulating the dominion of the victorious group over the vanquished, and securing itself against revolt from within and attacks from abroad. Teleologically, this dominion had no other purpose than the economic ex-ploitation of the vanquished by the victors. viii
And thus do we come once again to the all-important distinction between society and the state:
There are two fundamentally opposed means whereby man, requiring suste-nance, is impelled to obtain the necessary means for satisfying his desires. There are work and robbery, one’s own labor and the forcible appropriation of the labor of others … the “economic means” … and the “political means.”
The state is an organization of the political means. No state, therefore, can come into being until the economic means has created a definite number of objects for the satisfaction of needs, which objects may be taken away or appropriated by warlike robbery. ix
What society giveth, in other words, the state taketh away, first through territorial conquest; then through the establishment of a monopoly on the use of force; and, finally, through the use of said monopoly to confiscate the inhabitants’ property – the “objects” created “for the satisfaction of needs” – via the legalized theft of taxation.
And no matter how successful it has been in indoctrinating its people to believe oth-erwise, the American state is in no way an exception. On the contrary, it is thoroughly an organization of the political means, as were the colonies that preceded it:
The first fortunes on the virgin continent were out-and-out political creations – huge tracts of [conquered] land and lucrative trading privileges arbitrarily bestowed by the British and Dutch crowns upon favorite individuals and com-panies. ... The early royal grants … were the sole property titles of the newly created landed aristocrats.x
While the received truth regarding the subsequent creation of a constitutional republic is decidedly different – nothing less than a miracle, in fact – the real truth is that the United States Constitution, like all constitutions, was “not instituted to limit government but rather to enhance the political power of an elite that [sought] to entrench itself.” After all, the United States Constitution was written by and for a small class of property-owning adult white males, who limited the vote almost exclusively to themselves and, in the process, massively centralized what had been a loose federation of newly independent states.
Thus, instead of the “model for the protection of man in a state of freedom and order” that Jefferson imagined it to be, the American state, both before and after its founding, was a model of conquest and subjugation – not only of the continent’s native inhabitants and the millions of others imported from another continent but of the human detritus endlessly washing up on its shores.xi As such, the American state is simply another state and, like any state, is therefore “an evil inflicted on men by men” that persists solely through the indoctrinated enslavementxii of its people.
And to make matters worse, even some who are not indoctrinated but, on the contrary, recognize the state as the evil that it is, compound that evil by maintaining that the preservation of society nonetheless “justifies the action of the organs of the state.”
This is a very serious proposition – so serious, in fact, that the very foundation of human morality hangs in the balance, and with it the very viability of civil society. If, therefore, humanity is to have any hope of ridding itself of its nemesis, it must be shown that because the state is inherently evil, there can therefore be no justification for its existence.
So to this task we turn next, via another brief foray into metaphysics: “Evil and the State.”
-------------------------------------------------------------------------------
i Franz Oppenheimer, The State, Copley Publishing, 1914, p. 4; online version here.
ii Karl Popper, The Open Society and Its Enemies, Princeton University Press, New Jersey, 1962, 1966, p. 49.
iii Robert Nisbet, The Quest for Community: A Study in the Ethics of Order and Freedom, ICS Press, 1990 (Oxford University, 1953), pp. 90 and 91.
iv Ibid., Oppenheimer, p. xix.
v Ibid., p. 6.
vi Ibid., pp. 6 and 7.
vii Ibid., Oppenheimer, p. 5.
viii Ibid., p. 8.
ix Ibid., pp. 12 and 13.
x Ferdinand Lundberg, America’s Sixty Families, Vanguard Press, 1937, p. 50.
xi “[P]oor laborers will be so plenty as to render slavery useless.” – Revolutionary Connecticutian Oliver Ellsworth replying to revolutionary Virginian George Mason, as quoted by Forrest McDonald in Novus Ordo Seclorum: The Intellectual Origins of the Constitution, the University Press of Kansas, 1985, p. 51.
xii “None are more hopelessly enslaved than those who falsely believe they are free.” – Johann Wolfgang von Goethe
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